ORAL ANSWERS TO QUESTIONS

COMMUNITIES AND LOCAL GOVERNMENT

The Secretary of State was asked—

Social Housing

Phil Wilson: When he plans to introduce revised guidance for local authorities on social housing allocations; and if he will make a statement.

John Healey: Before the end of the month.

Phil Wilson: Part of Sedgefield has been designated a growth point in south Durham and is attracting a lot of economic investment. What more can the Minister's Department and Durham county council do to enhance investment in social housing in Sedgefield and other parts of County Durham?

John Healey: I am aware of the commitment that my hon. Friend's council in Durham has to helping people through this tough period of recession. I am also aware of its long-term plans to lift the county and its residents. He asked me what more the council could do. I suggest that it look at the announcement that we made last week of £1.5 billion extra in order that we can build this year and next year the homes that people need—affordable homes that people can rent and buy. My hon. Friend and his council will notice that we have increased fourfold the funding and therefore the number of homes that councils can build over this year and next year. In short, it should bid for the money.

George Young: The Minister will know that tenants in the social housing sector need to move from one local authority area to another for family or employment reasons. Does not the injunction from the Prime Minister to give priority to local people inhibit tenant mobility?

John Healey: No—exactly the opposite. As a distinguished former Housing Minister the right hon. Gentleman will recognise that we need new homes and we need to build homes that people can afford to rent. He will also know that there is a perception that the system for allocating council and housing association homes can be unfair, inflexible and can stop people who need to move in order to take up or pursue work from doing so. The Prime Minister announced and I will set out in detail before the end of the month ways in which local authorities can give greater preference according to the priorities and pressures in their area. That might include, for some, supporting those who want to work but who need to move in order to do so.

Clive Betts: Will my right hon. Friend confirm that giving more priority to people with local needs is not about race but about trying to help people such as Katie Wilson, in my constituency, who has been on the waiting list for 17 years and simply wants to be housed in the community where she was brought up, where her family and friends are? It is about allowing people to move near grandparents so that they can support the children and allow the parents to go out to work. It is those sorts of issues that are important and they are currently not given sufficient priority in the allocation systems.

John Healey: I hope that we can move beyond this argument about immigration. I am not proposing to change the rules about who can apply so that foreign migrants do not have a right to go on to council housing lists. I want to give councils greater freedom and greater scope to be able to make judgments about whom to give preference after they have housed those who are in the most serious housing need. The views of my hon. Friend's council in Sheffield might be very different to the support that councils in Southwark or Somerset might want to give. The principle for this Government is that we should give councils that greater scope to be able to devise and run their lettings list in a way that best meets local housing needs.

Julia Goldsworthy: I take this opportunity to welcome the Secretary of State to his new post and to congratulate the Housing Minister—although he is a familiar face in the local government Front-Bench team—on his elevation. I would also like to express my sorrow at the deaths of the six adults and children who died at the Sceaux Gardens estate the other day. I am sure that we all want to ensure that such a terrible tragedy cannot be repeated in any of our social housing estates.
	It was slightly cringe-worthy to hear the Housing Minister trying to explain this morning why his priority is to tackle a misperception about access to social housing when the fundamental problem, surely, is the lack of social housing. Is not the key way to solve that to get rid of the housing revenue account subsidy system? Given that the Prime Minister trailed such a move in January and that we now have a further consultation on a review, is it not time that the decision was brought forward rather than delayed further?

John Healey: I am grateful to the hon. Lady for her comments. She might have missed my statement last week, which set out my aim to dismantle the housing revenue account and the announcement that, from last week, councils that build new homes will be able to keep in full all rents and any capital receipts from them. It is a first step in making wholesale reforms, which are long overdue, and a part of removing the barriers to councils' being able to build, commission building and see the provision of homes in their areas that people need.

Rosie Cooper: I am aware of the consultation document seeking views on options for addressing the impact on local communities of high concentrations of houses in multiple occupation. Local residents in the centre of Ormskirk are affected by homes in multiple occupation, and in particular there is a high concentration of students. May I urge the Minister to take their views into consideration and to bring into reality changes to the legislation, as he sees fit from that consultation?

John Healey: I am looking at this matter very carefully, and will take into account the views of the residents in Ormskirk that my hon. Friend has reported to the House. I shall also take her views into account, and I am looking to make decisions on this matter pretty shortly.

Caroline Spelman: I also congratulate the Minister for Housing on his promotion, and welcome him and the Minister for Regional Economic Development and Co-ordination to their new roles in the Department. Like the whole House, I am sure, I wish to share in the condolences extended to the bereaved from Camberwell.
	I had to replay the Minister's interview on the "Today" programme this morning twice to understand precisely what the Government's position on housing now is. Will he confirm that the Government's plans may change the requirement in primary legislation to give housing priority to the homeless, families with children and the overcrowded?

John Healey: I am glad that the hon. Lady is following our announcements so closely. To be clear, I have said consistently—and I confirmed it last week, well before today's "Today" programme—that I am not changing the requirement for local councils to give priority to those in most serious housing need. In other words, I am not touching the reasonable preference categories. What I am looking to do, and I shall publish this at the end of the month, is to set out new statutory guidance that will allow councils more scope to give preference to people in their area who they believe are in most need, or to relieve the pressures that they are under. However, that can work only when placed alongside a serious programme to build more homes. That was what the housing pledge and the Prime Minister's commitment last week was all about.

Caroline Spelman: But given that waiting lists have soared by 800,000, and the legal requirement to house priority groups, is not the Prime Minister's pledge of
	"local homes for local people"
	simply empty rhetoric—a dog whistle to Labour's disillusioned and abandoned core vote?

John Healey: No. What would be empty rhetoric would be a professed concern for housing in this country alongside a plan to take £800 million out of the housing budget this year and 10 per cent. in every year after that, because that would mean that we could not build the homes that we need for the future.

Changing Places Toilets

Phyllis Starkey: What recent steps he has taken to increase the number of Changing Places toilets.

Ian Austin: New guidance for British standard BS8300 which was published in March includes for the first time detailed guidance for Changing Places toilets. A review of part M of the building regulations, which covers the access to and use of buildings, will begin this year and will consider the possible inclusion of such toilet facilities.

Phyllis Starkey: The Minister may not be aware that one of the first Changing Places toilets was installed in the centre of Milton Keynes. It means that families with disabled children can enjoy a day out just like any other family. When part M of the building regulations is looked at, may I urge him to ensure that it includes a requirement that a Changing Places toilet is put in every newly built major public building?

Ian Austin: First, may I thank my hon. Friend and the many hon. Members of all parties who have written to me about Changing Places? I also thank all those hon. Members who attended the recent Mencap reception for everything that they are doing to highlight the importance of providing suitable facilities for disabled people. No one who attended the reception and who saw the film about Lowri and her mother Bethan could fail to be moved about what they and many other disabled people have to experience.
	I congratulate my hon. Friend on the impact that she has had at a local level in ensuring that Milton Keynes was one of the first towns in the country to install one of the 85 new facilities that I am pleased to say have been developed. I can give her the assurance that she seeks, and I believe that the 85 facilities that have been developed are a very good start. I encourage all hon. Members to work with their local authorities, as she has, so that more can be provided in future.

East Sussex Waste Plan

Norman Baker: What funding his Department has provided to local authorities in connection with the East Sussex local waste plan since that plan was adopted.

Ian Austin: The Department has provided approximately £70,000 to East Sussex county council and Brighton and Hove city council through a combination of planning delivery grant and housing and planning delivery grant.

Norman Baker: I thank the Minister for that answer, but he might also have mentioned the private finance initiative credits provided previously by the Treasury. Does he share my concern that some of the promises from East Sussex county council, especially about its disliked incinerator, have simply not been carried through? For example, it promised that the incinerator could be accessed by rail, but in reality every deposit will come by road, with a lorry passing through Newhaven every two minutes. What can the Government do to ensure that the county council pays some attention at least to the environmental effect of its actions?

Ian Austin: We expect local plans to be based on a strong understanding of the potential for supplying energy to local developments by renewable and low-carbon technologies. We publish practice guidance to help do that and to show how it can be done.

Business Rates Revaluation

Jacqui Lait: What impact assessment his Department has conducted in preparation for the 2010 business rates revaluation.

Rosie Winterton: As business rates revaluation is a regular exercise every five years, no impact assessment is carried out in preparation. However, an impact assessment of the transitional arrangements for the 2010 business rates revaluation will be published shortly, alongside a consultation document setting out the Government's proposals for a transitional relief scheme.

Jacqui Lait: I am grateful to the Minister for that answer, and I am sure businesses will be grateful too. In a recent survey that I conducted in Beckenham, 46 per cent. of small businesses said that they needed help already with business rates. Given that the threshold for the supplementary business rate is only £50,000, and the effect that that will have on small businesses, does the Minister agree that a revision of that level should be included, otherwise the Government will be accused of sneakily increasing the burden on small businesses?

Rosie Winterton: In fact, the small business rate relief scheme is extremely effective. Overall, the assistance to businesses has been about £260 million in the past year. That is something that we introduced alongside a range of other measures to assist businesses during these difficult economic times, very often in the teeth of opposition from the Conservative party.

Ken Purchase: No one in the House can be unaware of the difficulty of imposing additional costs on small businesses, in particular at this time. The other side of that, of course, is that businesses continue to make demands on local services, especially the emergency services—fire and police—and especially where premises may be empty for whatever reason. So whatever else happens in the present exercise, will the Minister ensure that while protecting the interests and the balance sheets of small companies, local authorities are properly compensated for any income forgone as a result of that effort to protect small businesses?

Rosie Winterton: My hon. Friend makes an important point. Some £20 billion in business rates is collected and distributed to local authorities around the country. Given that the business rate increase is based on the retail prices index and that there was a spike from last September, we are introducing the transitional rate relief this year in order to ensure that there is not a big impact on businesses, while maintaining the income to the local authorities.

Justine Greening: This year business rate tax rises were so unaffordable that Ministers have had to introduce an emergency rates deferral scheme. Next year's revaluation could see thousands more struggling businesses hit again, just because of their location. If, in 2005, 700,000 properties saw their rateable values rise by 20 per cent. or more, how many businesses need to lose out in the 2010 revaluation before Ministers decide that their formula does more harm than good? If Ministers are not going to assess that impact, why not?

Rosie Winterton: The hon. Lady made the same point in a recent debate. She still does not seem to understand that the system is based on legislation that was introduced by the previous Administration, and is based on a formula whereby business rates increase by the RPI. There is overall no greater collection of the business rates. It occurs to me that the hon. Lady has never said in any of her contributions what she would do. She knows how the system works, yet she comes up with nothing but empty accusations, and no plans whatever for the future.

Pennbury Eco-town

Andrew Robathan: When he plans to announce his decision on the proposed Pennbury eco-town in Leicestershire.

John Healey: I expect to make announcements in relation to Pennbury and other sites with the potential to be an eco-town before the summer recess.

Andrew Robathan: I thank the Minister for that answer. He will know that there is next to no local support for the Pennbury town idea, excepting that of the Co-operative Society—a situation that, I suggest, involves some conflict of interest with the Labour Government. He will know also that there is nothing ecological about building on a greenfield site and no demand for housing on that scale, so will he learn the lesson of past new towns—of building huge new towns without any existing infrastructure and of how unpopular they have been—and understand what a disaster the new town would be for the people of Leicestershire?

John Healey: As I come to make decisions on the matter, I will have the benefit of quite an extensive consultation, of additional assessments that have been undertaken, and of the opportunity that has been given to everyone, including residents in the hon. Gentleman's constituency and Members, to make their views known. I say to him very clearly that the links that any developer or company may have with any of those eco-town proposals and with any political party are simply not a material consideration in the decision that I take, and will not be.

Peter Soulsby: May I urge the Minister, when he makes an announcement on Pennbury, to reject it firmly? The scheme will have a devastating effect on my constituency and on the city of Leicester in general—on transport infrastructure, in particular, and on regeneration investment in the city. The scheme is based on ludicrously unrealistic projections of traffic and jobs and is, frankly, the wrong scheme in the wrong place.

John Healey: I hear what my hon. Friend has said.

Edward Garnier: And the Minister will hear it again when, I hope, he permits me, the hon. Member for Leicester, South (Sir Peter Soulsby), my hon. Friend the Member for Rutland and Melton (Alan Duncan) and the right hon. Member for Leicester, East (Keith Vaz) to see him with an all-party delegation, as we have requested, to provide him with some of the facts of life about the popularity and utility of the scheme. It will be in my constituency and it will impose a town of 40,000 residents in the middle of rural Leicestershire. It is an idiotic scheme, and—Mr. Speaker, I shall be very brief—the sooner this Minister, who is the fourth such Minister to have to deal with the issue, realises that and promises not to make an announcement—

Mr. Speaker: Order. I think we have had enough, and can I just make the point that what one is seeking at Question Time is questions from hon. and right hon. Members?

John Healey: I may be slow sometimes but I get the message. I say to the hon. and learned Gentleman that there has been complete consultation and the decision-taking process is now under way. Just as when planning applications are called in, however, it would not be appropriate for me or any ministerial colleague to meet him or other Members. I reassure him, none the less, that I have an enormous amount of material and a wide range of representations, including from him, to take into account.

David Taylor: Notwithstanding the Minister's eventual decision on Pennbury, does he recognise that there is an acute shortage of affordable housing in the shire districts and boroughs of Leicestershire? Will he therefore suggest to me how we can encourage the reluctant landlords, which Tory district and borough councils often are, to take advantage of the new announcements that were made last week, rather than to spend their time coercing their tenants into a stock transfer or drumming their fingers waiting for the hon. Member for Welwyn Hatfield (Grant Shapps) to ride over the horizon—

Mr. Speaker: Order.

John Healey: My hon. Friend will realise and, I hope, welcome the series of announcements that I have made so far, building on the excellent work of my right hon. Friend the Member for Derby, South (Margaret Beckett). The further announcements that I plan to make are intended largely to remove the bias in the system against councils being able to build the homes that are needed in their area. So, there are some questions for my hon. Friend to ask of his council, and for every Member to ask of their local council. Why are local councils not building or commissioning the building that is necessary? Why are they not bidding for the funds that the Government are making available? Why are they not making the land available on which those homes could be built? Why are they not giving the planning permission for those homes to be built? And, indeed, why are they not going to make the lettings policies fairer in future?

Grant Shapps: The Prime Minister launched the eco-town programme in a blaze of publicity in May 2007 and then upped it to 10 eco-towns, but here we are two years later and the Government are still consulting on the matter and still consulting about planning guidance. The small print of last week's draft legislative programme, however, revealed on page 122 that the towns have now been pushed back to 2020. So, will the Minister—the fourth to have been across the Dispatch Box from me—now just admit that the programme is a shambles, that developers are running scared, that judicial reviews have delayed it, that it will require massive public subsidy when the coffers are bare and that the Government's own environmental advisory panel said that, at best, only one eco-town was environmentally friendly? Is it not time that this Housing Minister, the ninth since the Government came to power, admitted that the unpopular eco-town programme is a complete shambles and scrapped it?

John Healey: On the contrary. I ask the hon. Gentleman to be a little patient; I have said to the House that I expect to make an announcement before the recess, and I have not yet finished four weeks in the job. Eco-towns give us the opportunity to meet two needs: first, the need for new homes, including those that people can afford to rent; and secondly, the need to build our homes in future in a way that helps us tackle the threat of climate change. Given that more than a quarter of the total carbon emissions in this country come from homes, that is something that we simply must do.

Regional Spatial Strategies

Colin Breed: What recent representations he has received on the timetable for further reviews of regional spatial strategies.

Shahid Malik: The Department has had a number of recent representations from Members on the timetable for further reviews of regional spatial strategies. Margaret Beckett— [Interruption.] Sorry.

Mr. Speaker: Order. I think that the Minister meant the right hon. Member for Derby, South (Margaret Beckett).

Shahid Malik: My right hon. Friend the Member for Derby, South (Margaret Beckett) answered questions in the House on the point on 2 June 2009. In addition, the regional spatial strategy for the south-west has been subject to extensive consultation; there were 35,000 responses on its proposed changes.

Colin Breed: I thank the Minister for that response. The vast majority of those 35,000 responses opposed the building of 68,500 houses in Cornwall. Is it not time to scrap the targets and provide the funds to local authorities, which can build the affordable housing in the places where it is most needed?

Shahid Malik: The hon. Gentleman misses the point about regional spatial strategies, which are absolutely essential in ensuring that the Government meet their target of 240,000 extra homes by 2016. He should support that, given that 161,000 people in his region alone are on the waiting list for homes.

Barry Sheerman: When my hon. Friend is considering the strategies, will he emphasise the importance of dealing with climate change, and take it into consideration more than nimbyism?

Shahid Malik: That is precisely why the regional spatial strategies—and, shortly, the regional strategies—are being developed. They are to ensure that there is an integrated, holistic approach that takes stock of the challenge of climate change.

Bob Neill: Does the Minister not see the irony? In July 2007, the Prime Minister told the House:
	"we will continue robustly to protect the land designated as green belt."— [ Official Report, 11 July 2007; Vol. 462, c. 1449.]
	In May this year, the east of England regional plan was struck down by the High Court because, to use the judge's words, it would
	"erode the Green Belt without alternatives being considered"
	and because there was a lack of a proper strategic environmental assessment. The south-west regional plan has just been indefinitely withdrawn by the Government after the High Court gave an identical ruling, and judicial reviews have now been launched on the same grounds against the south-east regional plan.
	The Minister is new to his post. Would it not be a good idea to take this opportunity to scrap the derailed and discredited regional spatial strategy system, the Prime Minister's discredited promise, or both?

Shahid Malik: Seldom have I heard such a lot of rubbish in such a short space of time. The regional spatial strategies are crucial in ensuring that we get the housing outcomes that we want. With respect to the east of England judgment, small procedural elements needed to be readdressed, and the issue has been remitted to the Secretary of State. We will put it right and we will learn the lessons from the east of England and apply them to the south-west. We will move forward.
	Since 1997, the green belt has decreased by 0.8 per cent. However, if we take the New Forest national park into account, there has been a 2 per cent. increase since that year.

Council Rental Income

Fabian Hamilton: What steps he is taking to allow local authorities to retain rental income from new council homes; and if he will make a statement.

John Healey: On Tuesday last week, I made a statement to the House confirming that from that day councils would be able to keep in full all the rental income and capital receipts that come from any new homes that they build.

Fabian Hamilton: I thank my right hon. Friend for that answer. Does he agree that the changes that he has made would allow Leeds city council to regenerate one of the most deprived housing estates in the north of England—the Beckhill estate in my constituency? Will he agree at some later stage to visit that estate to see it for himself?

John Healey: I will certainly see whether I can fix a date—although my diary secretary will not be pleased that I am saying this—to visit the estate and accompany my hon. Friend in doing so. I hope that he will give every encouragement to the Tory and Liberal-led Leeds council to bid for the funds to build the new homes that people in Leeds need. I have been encouraged by the fact that it is one of the 20 local authorities that have signalled their intent to bid in the first round for the money that we will make available from the end of July.

Nicholas Winterton: Does the Minister not accept that these changes—which, by the way, I warmly welcome, as I believe in meaningful local government with a full range of responsibilities—have come too late to prevent what was then Macclesfield borough council from being forced to transfer its housing stock to a housing trust? Will he ensure that in future housing remains within the democratic domain so that it is democratically accountable and local people can decide where houses are built, instead of leaving it to an unelected, somewhat bureaucratic organisation?

John Healey: I thought for a moment that we were going to re-run some of the arguments that the hon. Gentleman and I have had about local government reorganisation in Cheshire. The point that he makes is, in different terms, consistent with what I explained to the House earlier—that part of the purpose of the changes that I have announced is to remove the bias in the system that prevents councils, and has done for more than two decades, from building in order to meet the needs in their area. From this point on, councils will be better able, on a fairer basis, to build in the same way that housing associations have been able to do in recent years.

Independent Local Government

Graham Allen: If he will bring forward proposals to establish constitutionally independent local government; and if he will make a statement.

John Denham: As my hon. Friend knows, the statutory independence of local government is set out in various Local Government Acts, and we are committed to the principle of local self-government. I want to ensure that we have the right balance of power and responsibility between central and local government, and I will shortly launch a consultation that will explore those issues. I want, in particular, to explore how democratically elected local authorities can influence all public spending on public services in their area.

Graham Allen: In finding the right balance to set local authorities free from what is, in effect, the most heavily centralised state in the democratic nations of the world, will my right hon. Friend take this opportunity perhaps to join Conservative Front Benchers and stop chaining local government, to set it free, and to allow it both the powers and the finance to look after as much of its own affairs as is possible?

John Denham: I think that my hon. Friend will accept that we have done a great deal to give powers to local authorities: they have had the three-year funding settlement, the amount of ring-fencing has been reduced, and the number of targets has been reduced. As I said earlier, I now want to embark on the next stage by ensuring that local authorities have the powers that mean that when somebody elects a local councillor they are electing someone who can genuinely influence public services in their area. However, it is also important that there are some minimum entitlements to the quality of service. We need to ensure that we balance the rightful, powerful place of local authorities with people's rights to decent services, wherever they live.

John Gummer: If the right hon. Gentleman is straightforward in this—and I am sure that he is—will he look carefully at the democratic deficit that would occur if there were a reorganisation of local government in Suffolk, which would mean either that the county of Suffolk took away the powers from locally elected people and covered an area stretching from Mildenhall across to my constituency instead of having real local authorities, or a change to an invented local authority with which nobody has any connection at all?

John Denham: I obviously hear what the right hon. Gentleman says. He knows that I am awaiting the report of the inquiry into that matter, and it would not be appropriate for me to comment, but I assure him that Ministers will give proper consideration to the results of those considerations.

Migration Impacts Fund

Bruce George: How many applications his Department received for funding under the migration impacts fund; and if he will make a statement.

Shahid Malik: I am pleased to say that we received some 330 proposals for funding. My right hon. Friend the Secretary of State will shortly announce the successful projects.

Bruce George: I am delighted that money is being made available—largely, I might say, provided by classes of migrants themselves. Can the Minister indicate not just the advantages accruing to migrants themselves but the general societal advantages of the migration impacts fund?

Shahid Malik: My right hon. Friend is right to point out that the fund is derived from increases in immigration fees and is intended to alleviate pressures on local services from transitional changes. There are a number of examples of projects we would like to fund that would benefit the whole community. One is tackling rogue landlords, which would have a direct impact on both migrants and other people in the neighbourhood and the community. That is the principle on which we are approaching the funding.

Council Tax

Andrew Stunell: When he next expects a revaluation of domestic properties for council tax purposes to take place; and if he will make a statement.

Rosie Winterton: We will not be considering whether or not there will be a council tax revaluation until at least 2010-11.

Andrew Stunell: Conventionally, one thanks a Minister for their answer, but may I say that it was very disappointing, especially for my constituents? They are increasingly puzzled and angry at a local tax system based on a 15-year-old valuation of their homes, which has no contact with current realities, equity or their ability to pay. Does the Minister and the Secretary of State not accept the urgent need for a new, fairer system based on the ability to pay, which would allow local councils to deliver good services at a fair cost?

Rosie Winterton: I suspect that the hon. Gentleman is referring to the local income tax, which Michael Lyons looked at but did not recommend for a whole host of reasons, including the risk of substantial increases for the working population, the cost burden on employers and the particular impact on small businesses. Yet again, that is an example of a Lib Dem policy that, while professing to do one thing, has quite the opposite effect.

David Drew: In advance of any major revaluation, will my right hon. Friend consider encouraging local authorities that want to offer council tax discounts for householders and businesses that have introduced energy-efficiency measures and microgeneration? In one fell swoop, that would deal more quickly with the problems of climate change than anything else that could be done.

Rosie Winterton: My right hon. Friend the Secretary of State is consulting on powers for local authorities, particularly with regard to low-carbon strategies. A number of local authorities are also innovatively considering, during these difficult economic times, how they can link energy-efficiency measures with stimulating the local economy and employing local people. That is exactly the sort of interventionist approach that we think is correct.

Listing Applications (Planning)

Richard Younger-Ross: How many planning applications involving demolition or partial demolition of a building for which an application for listing has been made have been submitted in the last 12 months; and if he will make a statement.

Ian Austin: These statistics are not collected. It would be difficult to do so, since planning applications are made to local planning authorities and listing applications are made to English Heritage. Planning permission is not in any case generally required to demolish an unlisted building outside a conservation area.

Richard Younger-Ross: I thank the Minister for his answer. English Heritage reckons that five properties pending listing have been demolished in the past year. The problem of pre-demolition while listing is being considered is recognised by the Government, who sought to bring in measures for interim protection in their Heritage Protection Bill. That Bill is still on hold. Can they say when they will bring in measures, either as a stand-alone Bill to introduce interim protection, or through the Heritage Protection Bill, which is not controversial and has the majority support of Liberal Democrats and Conservatives?

Ian Austin: Given the hon. Gentleman's background in architecture, he has made himself something of an expert on the matter. I agree that it is important to protect such buildings. He is right that a requirement for interim protection for heritage assets, which are the subject of an application for designation, was included in the Heritage Protection Bill last year, and we will introduce such a requirement when there is a suitable legislative opportunity.

Social Housing

Linda Gilroy: What plans he has to increase the supply of social housing; and if he will make a statement.

John Healey: During the recession, we take the view that the Government have a responsibility to maintain the building of homes that people can afford and create some of the jobs that will help the country through it. That is why we announced last week an extra £1.5 billion to support building such homes, more scope for local authorities to manage their allocation policies in future and a bigger role for local government. That means more homes, fairer lets and meeting local needs.

Linda Gilroy: I thank my right hon. Friend for that response and greatly welcome the Government's continued commitment to investing in social housing. I am sure he realises that Plymouth is no exception to the pressing demand for more social housing. Does he also envisage a role for community land trusts in filling the gap in affordable and social housing?

John Healey: There may indeed be a role for community land trusts in some areas. For example, in Plymouth, the Devonport new deal for communities is considering developing that sort of arrangement. We believe that community land trusts have an important part to play, and that is the reason for legislating last year in the Housing and Regeneration Act 2008, and for the availability of funding under the national affordable housing programme. We should respond to the consultation shortly.

Nicholas Soames: Will the Minister acknowledge that there is an urgent requirement for more affordable housing in my constituency and many others in the south-east, but that the infrastructure simply does not exist to support it on the planned scale? Will he consider what can be done to increase the share of Government expenditure on infrastructure in the south-east, which currently receives an unfair deal from the Government?

John Healey: The hon. Gentleman raises a broader question about funding for local councils, but he also gets to the heart of the matter. If he believes that his area needs more homes that people can afford to buy and rent, his council needs to play a part in the building programme that we are setting up—I hope he will urge it to do that and encourage it to bid. I also hope that he will make representations to his Front Benchers so that those budgets will not be cut in future.

House Repossessions

Derek Twigg: What steps he has taken to assist people under threat of repossession to remain in their homes during the economic downturn.

John Healey: To help people who may be threatened with repossession, we have put in place advice and support at every stage of the process—from free debt advice when they first get into trouble, to free legal advice and representation should their case end up in court.

Derek Twigg: I thank my right hon. Friend for that answer. The claimant count in Halton for May was up 88 per cent. on this time last year; we have almost the worst unemployment rate in the north-west. Is it not therefore essential that when the Government give help to people to remain in their homes, or help with social housing, areas such as mine, which are suffering much more than others, get priority?

John Healey: We are trying to do two things. First, we want to ensure that there is support for everyone, wherever they are, who may run into problems. Secondly, given the unemployment pressures in my hon. Friend's constituency, he will welcome our changes to support for mortgage interest, which have doubled the capital limit and shortened the period for which people have to wait for that support. I am sure that he will also welcome the money that has gone through his local authority towards debt advice, as well as help in the courts. At no stage, including when the case comes to court, is a repossession a foregone conclusion.

Local Authority Leaseholders

Karen Buck: What his most recent estimate is of the number of local authority leaseholders facing financial difficulties with major works bills.

Ian Austin: Information on the individual financial circumstances of the estimated 230,000 local authority leaseholders in England is not available. However, it is estimated that at least 6 per cent. of local authority leaseholders in London have received major works bills for £10,000 or more.

Karen Buck: May I emphasise again to my hon. Friend the predicament of many council leaseholders in Westminster, some of whom are about to receive bills for up to £58,000? Let me also stress to him that over the years, the local authority and the Government have been pressing home ownership on tenants, yet in some cases they are now being expected to pay bills the repayment of which will total more than their net earnings. Please may I meet Ministers again to discuss what can be done to assist those people and prevent them from risking losing their homes?

Ian Austin: I congratulate my hon. Friend on the fantastic job that she does in speaking up for her constituents on this issue, and on the work that I know she has done on it for a long time. I know how concerned she is about it, and I can tell her that the Department has been keeping it under review. I know, too, that she and other Members wrote to my predecessor to propose a number of measures. I would welcome the opportunity to meet her and other colleagues who have been campaigning on the issue.
	Topical Questions

Edward Timpson: If he will make a statement on his departmental responsibilities.

John Denham: I would like to refer to the tragic fire that occurred in Camberwell on Friday afternoon. I am sure that the House will wish to join me in offering sympathy to all those affected and, in particular, condolences to those who have lost loved ones. My hon. Friend the Member for Dewsbury (Mr. Malik), the Minister responsible for fire and rescue, met London fire brigade's incident commander yesterday afternoon to hear about the fire for himself. I would like to take this opportunity to place on the record our gratitude to the fire and rescue service and to other emergency services for the professionalism and bravery that they showed in responding to that distressing situation.
	The House will be aware that the fire is being investigated by both the police and the fire and rescue service, but at this stage it would be wrong to draw premature conclusions. However, the public will want to know that they will be kept fully informed. I have asked Sir Ken Knight, the Government's chief fire and rescue adviser, to report back to me urgently as conclusions emerge from the investigations and inquiries that are under way.

Edward Timpson: I am grateful for that answer. Let me turn to a more local issue for my constituency. In Crewe and Nantwich, as across the rest of the country, the quality of public pavements is a continuing problem. The issue came to the fore earlier this week when one of my elderly constituents tripped and fell, breaking her wrist and suffering serious facial injuries, which, sadly, is an increasingly all too frequent occurrence. Does the Secretary of State support my view, and that of the Crewe and Nantwich safer pavements action team, that a difference in level of 25 mm between paving stones is too great and that the threshold for deciding—

Mr. Speaker: Order. I am sorry for the hon. Gentleman, but the question was far too long. I am sure that the reply will be a lot shorter.

John Denham: This is not a subject that I have yet had the opportunity to look at in detail since I took up my post, but as I recall, the difference in level was originally established by the courts rather than by primary legislation. I have every sympathy for anybody who has suffered in that way, but the need for local authorities to invest in and maintain pavements is important, and it would be harder to do that if the kind of cuts proposed by the hon. Gentleman's party—£1 billion from my Department alone—were made.

Several hon. Members: rose —

Mr. Speaker: I call Fiona Mactaggart.

Fiona Mactaggart: Thank you, Mr. Speaker.  [ Interruption. ] I am impressed at being called after invisibly standing up to catch your eye, although I was standing up to catch your eye earlier. My urgent question is this. The Government have announced extra investment in public housing. Will they ensure that they invest in those local authorities that are ready to dig, such as Slough, where tenants will get houses more quickly than in areas where the local authority will spend a lot of time complaining about infrastructure but not doing anything?

John Denham: Let me reinforce the point made by my right hon. Friend the Minister for Housing. The challenge and the opportunities are now there for local authorities to show leadership. We are providing the funding and changing the rules, and I certainly want to see the money going to those places with housing needs where the local authority is prepared to step up and meet that challenge.

Mark Harper: I have given notice of this question to the private office of the Minister for Regional Economic Development and Co-ordination. A group of my constituents in Bromesberrow parish have written to me about certain charges that have hit their parish as a result of the independent auditor responding to a particular constituent. This has meant that their parish precept has gone up by 45 per cent. in the past year, which they find disproportionate and unreasonable. Has the Minister had a chance to look at the correspondence that was sent to her predecessor, the right hon. Member for Wentworth (John Healey), to see whether the Government could introduce any measures to fix the problem?

Rosie Winterton: I believe that the correspondence was dated 26 June. I have not yet looked at it, but I will do. I know that concern has been expressed in the hon. Gentleman's constituency about this issue. There are perhaps quite a small number of such cases. This is a difficult question, but we do not want to make it harder for people to object in the circumstances he has outlined. However, I will certainly look into the matter and into what the Audit Commission has said, and I will respond in writing to the points he has raised.

Andrew Slaughter: Does my right hon. Friend agree that a shortage of social housing is more likely to be the fault of Tory authorities such as Hammersmith and Fulham—last month, it announced plans to demolish 3,500 newly modernised social homes—than of new immigrants to the country, who, according to an Equality and Human Rights Commission report today, occupy only 2 per cent. of council homes?

John Denham: My hon. Friend is quite right to put the responsibility on local authorities. We shall see whether the local authorities that have in the past talked the talk, but not been prepared to take any action to produce social housing, will now respond to the investment and the challenge that the Government have laid down.

Anne McIntosh: Is the Secretary of State aware that his Department stands between the Government's commitment on landfill diversion and the one new major facility that will be required every day for the next four years in order to meet landfill requirements? What is he going to do to speed up the planning process in this regard?

Ian Austin: I can tell the House that, despite the fantastic induction that I have received over the past few weeks, I was not aware of that point. I will, however, be very happy to meet the hon. Lady to discuss the matter in more detail if she would like to do so.

Joan Walley: I welcome the boost that the Government have given to councils building more council housing, but will the Government look urgently at the Co-operative party's proposals for mutual home ownership, whereby home investments and pension funds could be used to ensure that those on modest incomes who cannot afford to buy a home can get on to the housing ladder?

John Healey: I will certainly look at that. In general terms, I am ready to look at and back anybody and any organisation that is prepared and able to get homes under way, so that people who need them have the opportunity to buy or rent them at a level they can afford.

Paul Rowen: It is now five months since the Government's extended consultation on the local authority business growth incentive scheme closed, and we are four months into the financial year. Given that the money involved is meant to incentivise regeneration, and that we are in a recession, when are the Government going to release that money to local authorities?

Rosie Winterton: As soon as possible. I am discussing the final details with Treasury Ministers, and we will make an announcement in the next few weeks.

Dari Taylor: Will one of the Ministers outline to the House how the future jobs fund will work? It is a project that has been put together by the Department for Communities and Local Government and the Department for Work and Pensions. Will the Minister also make it clear to the House that bids from local authorities will be supported only if they include value added—as Stockton's does—and if the jobs they make available will be permanent?

John Denham: The future jobs fund is an enormously important initiative by the Government to ensure, in particular, that there are jobs for young people who have been out of work for a long time, and for others in areas of high deprivation. Bids to the future jobs fund are being assessed at the moment, and the criterion that they should involve jobs that will last is clearly part of the process. I should also point out that this initiative is part of the Government's fiscal stimulus, and that our response to unemployment and the recession is possible only because of the wider measures that the Government are taking.

John Whittingdale: Does the Minister accept that the blanket requirement to find 3 per cent. a year efficiency savings is particularly difficult for smaller local authorities such as Maldon district council? Will he confirm that there may be some flexibility in the imposition of that target that takes account of the size of the authority, as well as of its record in having already achieved savings?

John Denham: That is an interesting question coming from someone who advocates a 10 per cent. cut in local government expenditure, which would have cut my Department's budget by £1 billion this year. There is a responsibility right across local government, as in other areas of government, to achieve the maximum efficiency and the best possible value for money for our citizens. I believe that the targets we have set are achievable, but I have to say that the destruction that the hon. Gentleman would wreak on local government is something we do not want to see.

Neil Turner: May I tell the Housing Minister how warmly welcomed his statement was last week on the housing subsidy account? May I also urge him to ensure that any changes he makes will enable excellent four-star councils such as Wigan to build on the 80 council houses it will be placing in the Scholes area of Wigan, so that there are more of them in future?

John Healey: My right hon. Friend the Secretary of State visited Wigan just 10 days ago. Both he and I are clear that Wigan is a first-rate authority and we are pleased that it wants to take maximum advantage of the new freedoms and the new funding we are ready to make available to help councils build. I hope that my hon. Friend will work with his council to make the most of the opportunities we are now creating.

Andrew Robathan: May I take the Secretary of State back to the proposal to foist a new town on the people of Leicestershire at Pennbury? Will he answer a philosophical question? What is eco-friendly or environmentally friendly about building 40,000 new homes in pristine and attractive Leicestershire countryside without any infrastructure to support them?

John Denham: I have every confidence in how my right hon. Friend the Minister for Housing is handling this issue, and I am not going to comment on the particular proposal. In listening to this debate, however, I regret the lack of imagination so often shown by those who cannot grasp the importance of understanding how we use planning, housing and urban development to ensure that we provide good-quality communities at the highest environmental standards for the future. Too many of the critiques seem to be opposed to the entire idea, rather than to particular individual proposals.

David Anderson: All Members must regret the fact that workers throughout the country are suffering job cuts, pay cuts and short-time working, but does the Secretary of State agree that that should not be used as a reason or excuse to cut the terms and conditions of local government workers?

John Denham: I want to pay tribute to local government workers for the job they do, as I was also able to do at the Local Government Association conference last week. Local government workers are in discussions with their employers, the local authorities, at the moment. Those discussions have to take place in the light of the three-year financial settlement and the expectations of council tax payers for reasonable settlements. I certainly regard the job that local government workers do as essential, and I believe that the rising public appreciation of local services that we have seen in recent surveys is down to their efforts and their commitment.

Andrew Stunell: Why are the proposals in the Department's consultation paper on building regulations published last week so timid in respect of controlling the energy performance of existing buildings, when that is so clearly vital for any sensible climate change strategy?

John Healey: It is indeed important in tackling climate change, but I am disappointed that the hon. Gentleman cannot see that these proposals are a step in the right direction. I shall take his comments as an early representation and submission to the consultation.

Rosie Cooper: I appreciate the Secretary of State's position, but will a Minister please comment on the fact that my constituents view with great suspicion the fact that Tesco has begun to buy up property in the centre of Kirkby ahead of the determination of a recent planning appeal? If this disastrous scheme were to go ahead, it would be seen by my constituents purely as legalised bribery.

John Denham: I can understand why my hon. Friend, who represents her constituency so assiduously, wishes to raise this issue, but she will understand, given where things are in the planning process, that no Ministers can respond in public on this matter—but we do hear what she says.

Sarah Teather: While I welcome the Government's conversion on the issue of the housing revenue account and their commitment to dismantling the system, it concerns me that there appears to be no mechanism to enable that to be done. Why have the Government not been willing to include a Bill in the draft legislative programme to get rid of the HRA system and extend that arrangement beyond just new houses, as the Minister suggested in his earlier answer would happen?

John Healey: I hope that the hon. Lady can wait until the end of the month, when I will set out in a detailed consultation document the plans we have and the steps we will take. There will be a timetable for the reforms that we need to introduce in order to do what I set out to do—dismantle the system, but do as much as we can in advance of the legislation that will be required.

George Howarth: Does my right hon. Friend accept that my hon. Friend the Member for West Lancashire (Rosie Cooper) ought to spend more time worrying about the development of her own town centre rather than, as she seems to be doing, preventing £400 million of investment from going into Kirkby?

John Denham: You will understand, Mr. Speaker, why this is a matter on which I did not wish to comment in public.

Points of Order

Bernard Jenkin: On a point of order, Mr. Speaker. Today the Ministry of Defence issued a written statement. While I have no doubt that that was perfectly in order, the statement contained the sensational announcement that the Government were making preparations for a strategic defence review. They have resisted calls for such a review for some considerable time. While this may be within the letter of your admonition that the House of Commons should hear major policy announcements first, Mr. Speaker, do you really believe that it is within the spirit of your admonition? Are there any means that you can use to bring a Minister to the House to make an oral statement? Alternatively, will you allow an urgent question on the topic tomorrow?

Mr. Speaker: The first response to the hon. Gentleman is simply stated. It is for Ministers to decide which orderly method of making their announcement they choose to deploy, and, on the hon. Gentleman's own admission, what the Government have chosen to do is perfectly in order. The second response—which I think may be of interest and encouragement to the hon. Gentleman, who takes a keen interest in these and related matters—is that Defence questions will take place next Monday, and he may find a suitable opportunity to explore the point then.

Mark Harper: On a point of order, Mr. Speaker. This morning I received a reply to a letter from Lord Myners, the Financial Services Secretary, dated 2 July. I had written to him on 3 December. To be fair to the Department, an apology from the permanent secretary was attached to the letter, but given that the Department aims to respond within 15 working days and the reply has taken seven months to arrive despite two chases from my office, I really do not think that this is in order. I know that the permanent secretary said that the Department is introducing measures to deal with the problem, but it would be helpful if you could make it clear to Ministers that such delays are simply not acceptable.

Mr. Speaker: I am grateful to the hon. Gentleman. I am glad that he has raised that point of order. He will be aware of the premium that I attach—as, I know, do a huge number of Back Benchers—to timely responses both to written parliamentary questions and, indeed, to letters.
	I think it fair to say that the hon. Gentleman has a legitimate grievance. He has suffered a lengthy delay. I hope that that delay is coming to an end, and that such an example of bad practice will not be repeated. The hon. Gentleman will be pleased to know that Treasury Ministers were present to listen to his point of order.

Christopher Chope: On a point of order, Mr. Speaker. You will recall that on 16 March this year the House resolved
	"that the UK Youth Parliament should be allowed for this year alone to hold its 2009 annual meeting in the Chamber of this House."—[ Official Report, 16 March 2009; Vol. 489, c. 742.]
	You will also know that the annual meeting of the Youth Parliament takes place between 24 and 27 July at the University of Kent at Canterbury, and that it will not now take place in the House. [Hon. Members: "Hear, hear."] I am delighted that some of my hon. Friends think that that is good news.
	My point of order is this, Mr. Speaker. I understand that there are proposals afoot for a meeting of the Youth Parliament to take place in the Chamber on Friday 30 October. Although that date does not fall in the recess, it is a non-sitting Friday, and a good deal of disruption could potentially be caused. Will it be necessary, Mr. Speaker, for the House to consider a fresh motion before such a course can be taken?

Mr. Speaker: The hon. Gentleman is a very experienced hand and knows very well—he referred to it at the start of his point of order—that the House has made a decision on the question of whether the Youth Parliament should be able to hold a debate here. The hon. Gentleman was present at and a contributor to the debate on that matter in March. I know that he would not seek for one moment to inveigle me into repeating a debate that we held some months ago. As a point of clarification, it might be of interest to the House to know what I understand to be the case; namely that the annual meeting of the UK Youth Parliament is indeed taking place later this month—I believe in the county of Kent—but that that is a quite separate matter from the special occasion of the debate in this House upon which the House agreed earlier this year.

Christopher Chope: rose—

Philip Davies: rose—

Mr. Speaker: I will take a point of order from the hon. Member for Shipley (Philip Davies), but I know that he will not want for one moment to continue the argument or to indulge in excessive or even tedious repetition.

Philip Davies: Further to that point of order, Mr. Speaker. I am seeking further clarification. The House resolved that the UK Youth Parliament should be allowed for this year alone to hold its 2009 annual meeting in the Chamber of the House. Surely if it is not going to have its annual meeting in the House, a new resolution will be needed.

Mr. Speaker: I do not think that there is any immediate prospect or likelihood of reversing the decision that the House made. I am quite happy to look both at the text of what was agreed and at the title of the event that is to take place in Kent. I know that the hon. Gentleman has a fastidious concern for correctness in these matters and that is something we can do our best to satisfy. But we cannot and will not rerun old debates. I know that the hon. Gentleman would not want that for one moment.

Parliamentary Commissions of Inquiry

Motion for leave to introduce a Bill (Standing Order No. 23)

David Heath: I beg to move,
	That leave be given to bring in a Bill to make provision for establishing a commission of inquiry subsequent to a resolution of Parliament into matters relating to the conduct of a Minister of the Crown; to make further provision for establishing a commission of inquiry into particular events which have or may have occurred and which have caused, or are capable of causing, public concern; to set out the procedures for setting up such a commission of inquiry, its powers, rights and privileges; to amend the Inquiries Act 2005; and for connected purposes.
	The Bill is partly a response to the setting up of the Iraq inquiry and the excellent debate in the Chamber the week before last. It is partly an attempt to look ahead and to prepare the House for any eventuality that we may have to face. But principally it is a Bill to enable Parliament, in at least one respect, to assert its authority, to remove its assumed metaphorical cringe to the Executive and to stand on its own two feet. That is a worthwhile objective in itself.
	Mr. Speaker, you will recall the problems that were identified in the debate on the Iraq war inquiry: the very long delay in setting up the inquiry at all, subsequent to the decision of the Prime Minister; the lack of openness that was originally suggested in the way in which the inquiry was to be conducted; and the deficiencies of process, with many hon. Members being worried about the inability to take evidence under oath and the inability of the inquiry to have the power to summon witnesses. There were concerns about the composition of the commission of inquiry—not those who were asked to join, but those who were omitted and the particular areas of expertise that they might have brought—as well as about the terms of reference and about the timetable for report.
	Some of those were subsequently dealt with as a result of the debate that we had in the House. The concerns were addressed by a process of retreat on the part of the Prime Minister, communicated by correspondence to the chairman of the inquiry. I am not sure that that was an entirely sensible way of dealing with the matter; nevertheless, it may have produced at least some potential remedies. But the issue is this: when we need an inquiry because of a matter of great public concern, it should be this House that takes the decision, not a member of the Executive and not a Minister. This has been known for a very long time. Lord North is not often quoted as a model for parliamentarians or for Prime Ministers but in 1774 he referred to this House as
	"the grand inquest of the nation...our very clear duty as members of this House is to undertake the very difficult, the very painful, the very meritorious task of watching our Ministers, of reprehending them, of blaming and calling them daily to account."
	That is a succinct expression of our duty, and, in extremis, part of the way in which we fulfil it is by setting up a public inquiry, or at least it was; there is a long history of this House having set up commissions of inquiry in earlier years. That was formalised under the Tribunals of Inquiry (Evidence) Act 1921. I do not defend every aspect of that Act; it had problems in procedural terms and parts of it were certainly capable of amelioration, but it nevertheless provided a clear power for the House to set up a commission of inquiry.
	That then began to be questioned by the Government when they were looking forward to introducing legislation in this area. The Select Committee on Public Administration, to which I owe a great debt of gratitude in preparing my Bill, looked at this in its first report of 2004-05. It stated that
	"in future inquiries into the conduct and actions of government should exercise their authority through the legitimacy of Parliament in the form of a Parliamentary Commission of Inquiry composed of parliamentarians and others, rather than by the exercise of the prerogative power of the Executive."
	Needless to say, the Government did not agree with that view; it will not surprise many Members to learn that they did not feel that it was right for Parliament as a body to be held to be superior to the prerogative powers of the Executive. Therefore, in the dying days of the last Parliament, they brought forward the Inquiries Act 2005, the effect of which was to repeal the 1921 Act and to remove entirely the formal role of Parliament in setting up public inquiries. I think that that was fundamentally wrong-headed, because there are 1,001 reasons why Ministers may not wish there to be a public inquiry into aspects of their conduct or the conduct of others in their control. There are so many reasons for them to delay, obfuscate or misdirect, rather than to have the searching after truth that a properly constituted public inquiry can provide.
	We should also remember that public inquiries often look into the actions of public bodies, of which Ministers are hardly disinterested observers; they have a responsibility there, so of course it is often not in their interests to set up a formal inquiry. I believe that were such inquiries to be set up under the authority of Parliament, they would have more legitimacy and the public would have more confidence. The PAC returned to this matter in its ninth report of 2007-08, and recommended the provision of a mechanism for setting up such an inquiry.
	That is the format on which my Bill rests. By amending the 2005 Act, it would restore powers in the 1921 Act to Parliament, although not in precisely the same form. It equips an inquiry to do its job effectively, enabling Parliament to confer the powers that an inquiry would need to take evidence under oath, to compel witnesses, to ensure that it has the papers before it, to ensure that its composition is appropriate to the task, and to ensure that wherever possible it takes its evidence in public so that the general public have the confidence that their interests are being properly represented. The parliamentary mechanism for the setting up of an inquiry requires a majority of this House, so it is not open to mischief—people will not be able to set up inquiries on spurious grounds, for instance—because a majority of this House is required, and a majority of this House will normally support the Government of the day unless there is a high level of public anxiety.
	I believe that this House has a specific job to do on behalf of the nation. That job is to speak for, and ask questions on behalf of, the public. Sometimes we can do that within this Chamber. Sometimes we can do it in our Select Committees and they are the appropriate way of looking into matters in more depth, but at other times those Committees can find obstacles put in their way, as the Select Committee on Foreign Affairs found when it carried out its own inquiry into the lead-up to the Iraq war. When that is the case, it is sometimes necessary, in order to restore faith in democratic principles within this House and to allow the public to have sight of the truth, to set up a properly constituted commission of inquiry. When we do that, it should be in the hands of this House and this Parliament, not those of that Executive. That is why I believe this Bill is so important and why it has garnered the support of so many hon. and right hon. Members on both sides of the House, and it is why I hope the House will allow it to go forward today, so that we can perhaps make progress, even in the short time left available in this Session of Parliament, towards restoring some faith and credibility in this House.
	 Question put and agreed to.
	 Ordered,
	That Mr. David Heath, Dr. Tony Wright, Mr. Michael Howard, Sir Menzies Campbell, Mr. Graham Allen, Mr. Iain Duncan Smith, Sir Alan Beith, Angus Robertson, Andrew Mackinlay, Mr. Richard Shepherd, Paul Rowen and Sir Nicholas Winterton present the Bill.
	Mr. David Heath accordingly presented the Bill.
	 Bill read the First time; to be read a Second time on Friday 16 October, and to be printed (Bill 130).

Finance Bill (Ways and Means)

Resolved,
	 Transfers of trade to obtain terminal loss relief
	That provision may be made in the Finance Bill for disapplying section 393A(2A) of the Income and Corporation Taxes Act 1988. —(Mr. Timms.)

Finance Bill

Consideration of Bill, not amended in the Committee , and as amended in the Public Bill Committee

New Clause 8
	 — 
	Transfers of trade to obtain terminal loss relief

'(1) In section 393A of ICTA (set off of losses against profits of same or earlier accounting period), after subsection (2D) insert—
	"(2E) But subsection (2A) above does not apply by reason of a company ceasing to carry on a trade if—
	(a) on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and
	(b) the company's ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to secure that subsection (2A) above applies to a loss by reason of the cessation."
	(2) The amendment made by subsection (1) has effect in relation to cessations of a trade on or after 21 May 2009.'. — (Mr. Timms.)
	 Brought up, and read the First time.

Stephen Timms: I beg to move, That the clause be read a Second time.

Mr. Speaker: With this it will be convenient to discuss the following: new clause 5— Pre-commencement notification
	'(1) Part 7 of FA 2004 (disclosure of tax avoidance schemes) is amended as follows.
	(2) In section 308 (duties of promoter) after subsection (5) insert—
	"(5A) A person who is a promoter in relation to a notifiable proposal may seek pre-commencement approval from HMRC as to whether the proposal is in accordance with current legislation.
	(5B) HMRC shall respond within a reasonable period of time to any request for pre-commencement approval under subsection (5A).'.'.
	Government amendments 41 and 42
	Amendment 34, in schedule 17, page 202, line 19, at end insert
	'or part of a transaction of a value exceeding £100 million'.
	Amendment 35, page 203, leave out line 10.

Stephen Timms: The amendments and new clauses in this group all concern tax avoidance. For the tax system to be effective everyone needs to pay their fair share. Tax avoidance damages the ability of the tax system to deliver its objectives, imposes big costs on society and shifts a greater burden of tax on to taxpayers who do comply with the rules. So the Government are committed to continuing to move quickly and effectively to tackle tax avoidance in all its forms.
	What I shall do, if I may, Mr. Speaker, is speak to the Government new clause and amendments in this group and seek to catch your eye later to respond to comments made by others when they discuss the other new clause and amendments.
	New clause 8 counters an avoidance scheme that has been notified to Her Majesty's Revenue and Customs. The scheme exploits corporation tax terminal loss relief rules that allow losses arising in a trade in the 12 months prior to cessation to be carried back and set off against profits made in the previous three years. The scheme works by artificially engineering a deemed cessation of trading, which allows the company to access the relief in circumstances not intended by Parliament, and it could be used by a large number of companies and it poses a risk of significant loss of revenue. In order to stop companies exploiting the scheme and, thus, to protect the Exchequer, I made a written ministerial statement on 21 May announcing our intention to introduce this legislation.
	The new clause addresses situations in which there has not been, in any real sense, a cessation of the trade, but where it is claimed that the cessation occurs as a result of the trade being transferred to a person outside the scope of corporation tax. The new clause is targeted only at avoidance and applies only where it can be established that the reorganisation concerned is part of a scheme or arrangement, one of the main purposes of which is to access terminal loss relief. In such circumstances, terminal loss relief will not be available to the transferring entity. The new clause provides vital protection to the Exchequer from wholly artificial avoidance schemes and does so in a targeted and proportionate manner. I therefore ask hon. Members to ensure that the new clause stands part of the Bill.
	Government amendments 41 and 42 seek to ensure that clause 59, which contains a provision to counter an avoidance scheme that abuses the double taxation relief rules, does not hit any unintended targets. Following representations, Government amendments were tabled in Committee that were intended to ensure that the clause would not have an unintended effect in normal commercial situations. The amendments would have provided that the clause applied only to payments made under the laws of a territory outside the UK. These amendments reflected agreement that HMRC reached with industry legal experts and had the advantage of following existing legal precedent that applies for the purposes of controlled foreign company legislation.
	The Government amendments would have covered the overwhelming majority of cases in which refund of foreign tax might arise from commercial contracts. However, after those Government amendments were tabled, further representations were received which showed that they may not go far enough to ensure that the clause does not hit any unintended targets. Although these are unusual circumstances, I said during the course of our debate on this clause in Committee that it is right that we should take account of them and that I would return to this matter with further Government amendments on Report—and I have done so.
	During the Committee debate, I made it clear that I accepted the principle of the similar Opposition amendments, but that I wanted to reflect further on the issue to ensure that any amendments were technically correct. The new Government amendments contain one minor adjustment, compared with the Opposition amendments in Committee, in that they refer to a "tax authority" rather than a "taxing authority". This is because a taxing authority might be seen as the legislative body which imposes the charge to tax, rather than the authority that assesses and collects the tax, and makes any necessary payments or repayments—a small but necessary change. The amendment has also been duplicated to cover the situation where the taxpayer is seeking a deduction for foreign tax, as well as where double tax credit relief is sought.

Rob Marris: Will my right hon. Friend give way?

Stephen Timms: I gladly give way to my hon. Friend, whom we greatly missed in Committee.

Rob Marris: Actually, I do not wish to press my point —I have reread the provision and I now understand it.

Stephen Timms: I hope that my hon. Friend will not feel discouraged from intervening later in the debate.
	The amendments will ensure that this clause will not affect normal commercial arrangements, and I ask the House to support them. I will seek to catch your eye later, Mr. Speaker, to respond to points made by others about this group.

Stewart Hosie: I rise to speak in favour of new clause 5. I originally had no intention of tabling such a new clause until we had the debate upstairs on clauses 66 and, more importantly, 67. Both of those clauses rightly seek to outlaw the highly contrived tax avoidance schemes that the Minister described in some detail at the time. That was the right thing to do.
	Interestingly, the debate on clause 67 almost completely ignored its content and revolved around the issue of principle of retrospective legislation. In general terms, I oppose retrospective legislation, especially when it comes to the tax code, because it delivers uncertainty, but I do recognise that from time to time it might be necessary. One of the reasons why retrospective legislation is necessary when it comes to clamping down on contrived tax avoidance schemes did not become clear until after the debate in Committee.
	Let me explain. The process that is followed in such schemes is that tax avoidance schemes are developed by promoters, they commence operating and only then, post-commencement, are they notified to the HMRC, which can—and sometimes does—outlaw the practices and introduce retrospective changes to the law to facilitate that. In the case of clause 66, the scheme was effectively outlawed within a week or so of the Revenue's being notified of it. The Government can act very quickly, but not always, and it can take some time—perhaps a year—to introduce the necessary retrospective legislation. That is precisely what happened in the instances that we discussed in Committee.
	It struck me as somewhat peculiar that such schemes were not checked by the Revenue in advance of their commencement to allow the commissioners to rule on their legality or otherwise or even to suggest, even if they were legal, that they were likely to be outlawed quickly because they were simply going to be tax avoidance schemes. I was very pleased, when we probed the Minister, to get his reply. I asked whether he could
	"confirm that promoters are able to seek confirmation of the schemes in advance"
	and the answer was:
	"Promoters can seek that clearance as well. They are required to disclose, but they can seek clearance if they wish." ——[ Official Report, Finance Public Bill Committee, 16 June 2009; c. 431.]
	However, it was not until two days later that the Minister rather graciously corrected what he had said. His letter said:
	"In both cases, the correct answer should have been"—
	I shall read out both paragraphs for the avoidance of any doubt. They read:
	"HMRC offers a clearance service to businesses covering the tax implications of commercial transactions"—
	I do think that there should have been more commas in this sentence—
	"where there is material uncertainty as to the tax outcome and the issue is of commercial significance to the business. Under the clearance regime HMRC will not give advice, or comment on, tax avoidance schemes.
	In addition to the clearance service for business, HMRC offers a written...service to personal tax customers covering completed transactions where the correct tax treatment is in doubt or where guidance is needed on HMRC's interpretation of recently passed law or its application to a specific proposed transaction, where there is genuine uncertainty. This written advice service does not cover arrangements where tax avoidance is an issue. The scope and terms on which this service is offered is set out in Code of Practice 10."
	That is extremely clear, but the implication of that answer is that the Finance Bill, unamended, would perpetuate the status quo, which is that schemes can be developed, promoted and commenced, people can buy into them or use them and they are then notified to the HMRC, outlawed and made subject to retrospective changes. That all risks uncertainty in the tax code, which none of us wants to see, and a potential loss of revenue yield, I am certain. Most importantly, it risks individuals taking tax or financial planning advice or action, thinking that they are doing the right thing and that they are behaving wholly within the law, and finding that they are then subject to retrospective changes to a law that they had no intention of breaking.
	It would be much simpler to allow promoters to clear schemes in advance to ensure that if they were illegal, or likely to be outlawed, they simply would not be promoted. That would give us certainty in the tax code and protect those individuals who think they are doing the right thing and end up being subject to retrospective legislation.

Colin Breed: I fully agree with the thrust of the hon. Gentleman's argument, but he might be aware that the Select Committee on the Treasury received certain information from Barclays bank about its tax avoidance schemes. The schemes that it developed are extremely complex, and it took them to HMRC and got the staff there to look at them and basically approve them, because it did not have the resources and everything else to go through it all, whopped it back to its clients and said, "We put this to HMRC, they think it's okay and now we have all sorts of ways of trying to alleviate that"—

Mr. Speaker: Order. I gently say to the hon. Gentleman that the erudition of that intervention was equalled only by its length.

Stewart Hosie: The hon. Member for South-East Cornwall (Mr. Breed) makes an important point about the complexity of some schemes, but it is the very complexity of the tax code that allows highly complex and contrived schemes to operate. There is an argument for simplifying the tax code as a whole, but today's debate is not about that. I want to ensure simplicity, help people avoid illegality and protect tax yields. That seems sensible, and I hope that it is uncontentious—unless there is a hidden argument or a problem in the Revenue that the Minister will tell us about in a few minutes.
	Most Opposition amendments are moved to claw back powers from HMRC, or to stop officialdom interfering in people's lives or businesses. Almost uniquely for me, I have moved the new clause because I want to give the tax commissioners more powers and responsibility. It makes absolute sense for them to be able to validate schemes in advance and declare them either legal or illegal. More importantly, even if a scheme is legal, the commissioners should be able to tell its promoters, "Yes, it's legal today, but I suspect that the Minister will come down on it like a ton of bricks in two weeks' time, so it's probably better not to promote it." That would create certainty in the tax code and protect people looking for tax and financial planning.
	I look forward to what the Minister has to say. I want to offer more powers to the Revenue, in the hope that we can get certainty and protect people from the dangers of retrospective legislation.

Michael Meacher: I want to make one very brief central point, and it relates to what the hon. Member for Dundee, East (Stewart Hosie) has just been saying. My right hon. Friend the Financial Secretary has explained that new clause 8 is necessary to block yet another loophole that would open up yet another lucrative tax avoidance mechanism, and I am absolutely sure that he is right. What is significant is that the Government have found it necessary to table the new clause now, and that is because the latest tax avoidance scam surfaced only after the Finance Bill was published.
	Similar scams are being invented all the time, by extremely highly paid City accountants and lawyers. As a result, the Treasury has to scurry around trying to block them up as quickly as they are created.

Mark Field: I do not disagree that it is perfectly within the rights of any Government to have a rigorous anti-avoidance regime along the lines that the right hon. Gentleman clearly supports, but does he accept that, commensurate with that, there also needs to be a full and open clearance process? Such a process would help prevent scams being created, and the need to deploy anti-avoidance measures.

Michael Meacher: The question is what particular transparent and open system the hon. Gentleman would recommend, but I am in favour of something like what the hon. Member for Dundee, East has proposed. As I shall explain in a moment, we need a general provision of the sort that would avoid the House of Commons continually spending its time trying to block one scam after another. I agree that that is not the most efficient way of dealing with the problem.

John Pugh: Does the right hon. Gentleman agree that it is a great pity that new clause 2 has not been selected, as in a sense it does precisely what he has described?

Michael Meacher: I was coming to that. The hon. Gentleman and I have had some conversations on this subject, and I entirely agree with him. My question to the Minister has to do with whether the Government are engaged in a labour of Sisyphus. Why do they not seek to break the cycle of endless tax avoidance scams—because, being clearly designed to get round paying tax, that is what they are—by introducing a general anti-tax avoidance principle into the UK tax system? I can think of two or three previous Treasury Ministers who were very much in favour of that course.
	I tabled a proposal along these lines two months ago, and I am glad to see that the hon. Member for Southport (Dr. Pugh) has retabled it as new clause 2. I realise that it has not been selected for debate, presumably because it would increase taxes. Of course, that is exactly what the new clause is designed to do, where appropriate, but under our rules only the Government have that prerogative. But I want to ask my right hon. Friend the Financial Secretary why we continually spend our time scrabbling around in the bulrushes trying to block off every new tributary of tax avoidance, when we could seize the high ground and block this ever-flowing antisocial river altogether at one go. There are good precedents for this—

John Gummer: Will the right hon. Gentleman give way?

Michael Meacher: I am amazed how popular my speech has become. I thought it would be two minutes, but I always give way to the right hon. Gentleman.

John Gummer: Does the right hon. Gentleman accept that one of the prices of liberty is eternal vigilance, and that one has to be very careful about trying to claim that people are guilty unless proved innocent? That is precisely the reason that we do what we do. It is extremely dangerous to start off a taxation system on the basis that people must not be allowed to do anything lest they avoid tax.

Michael Meacher: I do not often disagree with the right hon. Gentleman, but here I take a rather different line. Of course there must be transparency, as the hon. Member for Cities of London and Westminster (Mr. Field) said, and of course we do not hold people guilty until proved innocent. What I am recommending—the hon. Member for Dundee, East said the same—is that there should be a general principle which makes it clear that if the purpose of the device is solely to evade or avoid tax and it has no sensible, practical, obvious economic purpose, it should be ruled out in terms of what the mechanism is designed to do.
	I would add that there should be some penalty to discourage such action in future. That is not unfair. It is a way of avoiding an artificial, deliberate and proliferating attempt to avoid tax, which means that the rest of us who are not super-rich and not big corporations have to pay. I do not think that is a very good idea.

Rob Marris: Will my right hon. Friend give way?

Michael Meacher: This is extraordinary. I always give way to my hon. Friend.

Rob Marris: I am grateful—it is Report stage. I have been racking my brains, going back a long time. I think my right hon. Friend will find that there is a Court of Appeal case to the effect that he seeks to push for this afternoon. It is a case about artificial transactions from, I believe, 1985, the Ramsay and Cook case, which does much of what my right hon. Friend wants.

Michael Meacher: My hon. Friend has the advantage over me because I have not looked at that, but I find it difficult to believe that it achieves what I am seeking to achieve. If that is so, I am surprised that such schemes continue to roll on and on.
	To conclude the speech, which I am finding difficult, there are good precedents for such a principle—it is not a novel idea—particularly the Australian one and, interestingly, in Jersey, both of which seem to be working perfectly well and have been accepted by all parties in those Parliaments. Will my right hon. Friend the Minister please explain the Government's thinking and when we might expect such a provision to be brought forward? It is sorely needed when the deficit in the public accounts this year is of the order of £175 billion.

John Pugh: I shall speak to amendments 34 and 35 and broadly in support of new clause 5. I do not doubt the Minister's or the Treasury's sincerity and determination in wishing to prevent tax avoidance, I do not doubt the skill and intelligence that they have put to the task and I do not doubt the expertise and knowledge that underlie the Government proposals. I need to be convinced that all this is enough to frustrate a huge, massively rewarded and well financed avoidance industry at the heart of modern commerce.
	The right hon. Member for Oldham, West and Royton (Mr. Meacher) outlined the Government's approach. They seem to advocate general principles and then track and box off avoidance schemes while encouraging notification, but they do not want to introduce a general anti-avoidance law. None the less, the Bill withdraws an important general control—section 765 of the Income and Corporation Taxes Act 1988. Albeit an anachronistic one, it is a general control. Pleasing though it might be to the City, this approach has failed to convince many people far more knowledgeable in this field than I. My amendments seek to toughen up this approach.
	My preference, like that of the right hon. Member for Oldham, West and Royton, is for the introduction of a general anti-avoidance provision. It is in new clause 2, an unselected amendment in my name. A general anti-avoidance provision would reduce tax complexity straight off: complex avoidance schemes father complex tax law. The provision works elsewhere in the world, such as in Australia, Canada and all sorts of places; and with proper Revenue and Customs advisory services available to business, it would not need to gum up business.

Mark Field: Will the hon. Gentleman not also consider that the parentage is the other way around—that complex tax law begets complex avoidance provisions?

John Pugh: That is a fair point, but I was going to say that the Treasury at one stage, in the halcyon days of new Labour, began a consultation on the phenomenon of the desirability of a general anti-avoidance rule, or GAAR. Interestingly, it said:
	"The United Kingdom is unusual"—
	unusual—
	"among developed countries in having neither a statute nor an established legal principle to counter tax avoidance in general. Many other countries in the developed world have found such a rule or principle to be a very useful remedy for countering tax avoidance, although not a universal cure."

Stewart Hosie: Before the hon. Gentleman moves on, may I just check something? There are concerns that, if we have specific anti-avoidance rules, having an overriding anti-avoidance rule, too, might be a stage too far. If he were to get what he wanted with a general anti-avoidance rule, would he want to see the removal of the specific rules, too?

John Pugh: We need a belt and braces rule—a specific provision that is assisted by a general rule. Again, the Government's consultation stated:
	"A GAAR, applying at first only to the corporate sector,"—
	this was 1998 or thereabouts—
	"would aim to put a stop to many of the complex avoidance schemes which currently cost the Exchequer large sums. In addition, it would be expected to discourage people from devising contrived avoidance schemes in the future."
	That was the Treasury, not the Opposition or the right hon. Member for Oldham, West and Royton.
	Now we have the repeal of the time-served section, section 765 of the 1988 Act, which ensures that when funds leave the country the Treasury is notified of any detriment to it. It is an old rule to do with the flight of sterling and so on, but it does—or did—a good job. We have the replacement of a clearance and pre-disclosure scheme with a light-touch reporting regime, coupled with a series of attempts to outlaw specific dodges and scams.
	However, if we read the legislation, we find that only transactions above £100 million will need to be reported, and not even then if they are said to be
	"in the ordinary course of trade"—
	hence my amendment. If, after six months, there is no report on a £100 million transaction, there will be a ludicrous fine of £300, which I remember made the hon. Member for Northampton, South (Mr. Binley) incandescent in Committee. It is a ludicrous penalty to enforce on a £100 million transaction.

Brian Binley: "Incandescent" is a slightly heavy word in that respect!

John Pugh: The hon. Gentleman is a man of most moderate temperament, and I should not wish to malign him.
	In the game of chess being played out between Treasury officials and City tax lawyers, the Treasury is agreeing to play blindfolded, and there can be only one winner. What is there to stop a transaction being broken down into segments of less than £100 million to avoid reporting requirements—just wrapping up the transaction differently? What stops a firm declaring any transaction to be in "the ordinary course of trade"—a phrase that, incidentally, has created legal problems in countries where a general anti-avoidance provision is in place?
	The Liberal Democrat amendments are simple attempts, like new clause 5, to strengthen the Treasury's arm and powers of intervention—to make exemptions less open to abuse and less user-friendly. The principal argument for user-friendly exemption is the old chestnut, beloved of the CBI, about the anti-competitive dangers of slowing up commerce. At first, I took that argument seriously; I thought it a sound, decent argument. It is the argument against section 765 and the long-standing argument for its withdrawal. Indeed, I thought that it was a serious, solid argument, despite the claims made only four years ago by the then Paymaster General in its favour, saying that it saved
	"a great deal of revenue"——[Official Report, Finance Public Bill Committee, 30 June 2005; c. 319.]
	However, I had the good fortune recently to speak to a man who actually administers the provision. He told me that it still protects a great deal of revenue, that clearance procedures in the modern Revenue and Customs are very rapid, and that adequate advice is freely and readily available—in hours not days—provided HMRC has the staff to provide it. Understandably, I asked the Government—the Financial Secretary, actually—how many staff at HMRC administered the provisions of anti-tax-avoidance legislation. The answer that I received reads as follows:
	"HM Revenue and Customs (HMRC) staff use whatever parts of the tax code are relevant to help people and businesses pay the right amount of tax and, where necessary, to tackle tax avoidance, evasion and fraud."
	But the right hon. Gentleman went on to say:
	"HMRC is unable to provide information regarding the specific number of resources deployed on the separate elements of that work."—[ Official Report, 22 June 2009; Vol. 494, c. 670W.]
	The Government simply cannot tell us how many people are involved in counteracting tax avoidance.
	In summary, I am not confident about the Government's approach, the reporting regime, the exemption or the penalties, which border on the pathetic. I am aware of the dilemma that the Government face: business legitimately needs clarity and speed, and the Treasury needs transparency, fairness and accuracy. However, there is an overwhelming case that a general anti-avoidance provision, coupled with revenue efficiency, can cover most of that. Loose reporting, pathetic penalties and a tangle of tax regulations, however, are unlikely to.

Mark Hoban: My hon. Friend the Member for Cities of London and Westminster (Mr. Field) made an important point: sometimes the complexity of the tax system itself gives rise to opportunities for tax avoidance schemes. When relief is given, tax advisers and planners look to how they can maximise it to reduce their clients' tax bills. From Finance Bill to Finance Bill, we have seen new loopholes being created and closed down—there have been significant revisions to the legislation on film tax relief in the past 10 years, for example.
	There is a momentum within tax law itself that creates the loopholes that can be exploited; the loopholes are then closed, creating more complexity. We need to get that rolling process under control. New clause 8 represents an example of when the relief available on the termination of a business has been used to create a new opportunity for tax planning.

Frank Field: I know that the hon. Gentleman has only just begun, but before he finishes I hope that he will comment on the measures advocated by my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher), which aim to stop the poison from coming into the system in the first place. What the right hon. Member for Suffolk, Coastal (Mr. Gummer) said almost takes us back to last century's debates on vaccination—did we want people to stop becoming ill in the first place, or were we to deal with the illness only once they became ill? That example has similarities with the issue of tax avoidance, as distinct from tax evasion.

Mark Hoban: If I got dragged down that line of argument, Mr. Speaker, I would be trespassing into a new clause that was not selected, so I shall be careful about what I say about that general principle.
	New clause 8 responds to a specific anti-avoidance scheme. In Committee, we discussed clause 23, which allowed losses to be relieved and extended the carry-back period for losses. During that debate, the Financial Secretary commented on the generous nature of the terminal loss relief, particularly for businesses that had closed down for reasons of economic viability. The scheme sought artificially to use the losses by trying to transfer a business to an entity outside the scope of corporation tax—for example, a partnership in respect of which an individual had a small share of the profits but the original company was entitled to the majority of the profits. That meant that the company was then able to claim terminal loss relief and carry back trading over possibly three years even though trade had continued. The conditions in the clause prevent the artificial abuse of the availability of that loss relief, and we welcome the step that the Government have taken.
	New clause 5, tabled by the hon. Member for Dundee, East (Stewart Hosie), has its origins, as he said, in a debate on new clause 67 that we had in Committee, several of whose members had been lobbied by a company called NT Advisors, which had devised a scheme that was at the core of the provisions in the clause. The new clause has some appeal in proposing a pre-clearance device for such schemes, but I add a note of caution about this sort of mechanism. I understand that tax advisers spend a great deal of money on their clients' behalf in trying to devise these schemes, which are potentially quite lucrative, as the numbers in clause 67 suggested. Clearly, they do not want to clock up fees with no chance of the scheme being viable, so I can see the attraction for them in having a pre-clearance device, which would save them a great deal of time and money. It would also put the onus on HMRC to act as almost a subcontracted or out-sourced arm of the tax adviser in looking at the fine detail of such schemes to see whether they worked. The advisers themselves should bear the principal responsibility of getting schemes right; otherwise, there is a risk of HMRC being inundated with speculative, half-thought-through schemes under which the advisers are looking to HMRC to tie up the fine detail.

Stewart Hosie: The hon. Gentleman's argument is absolutely right. However, advisers and promoters are coming up with schemes right now, and there is a real risk of loss of revenue yield and of individuals so engaged finding themselves subject to retrospective legislation. I am trying to work out where the balance should lie between the Revenue saying, "No, you can't do it—we're about to outlaw it", and allowing people to continue to develop these schemes and then finding that they are subject to retrospective legislation.

Mark Hoban: Indeed, balance is a difficult issue to get to the bottom of. No one in this House likes to see retrospective legislation, and there are rules that constrain its use. In the debate on clause 67, we discussed the Rees rules and the doctrine put forward by my right hon. Friend the Member for Charnwood (Mr. Dorrell) when he was a Treasury Minister; we even referred to some principles established by the previous Paymaster General. However, I am worried that we may end up in a situation where HMRC is used as a clearing house for tax advisers and has the responsibility for checking whether the schemes work. The law should be clear enough for advisers to work out whether schemes are legal, and they should not be subcontracting their work to HMRC. Moreover, people who buy into these schemes will need to think carefully about the advice that they have been given and what happens if it turns out to be wrong. I suspect that in some cases, if the scheme does not quite work according to plan, advisers may make some clawback and try to cover their own backs by avoiding having to repay losses to their clients.
	I am a little anxious about where new clause 5 would take us. In other areas, it is right that pre-clearance arrangements are in place and discussions can be had with the Revenue, but that arrangement causes me concern in this context. What would happen if HMRC did not reply within a reasonable period of time? Would it be assumed that the scheme has been passed as fine to be sold to a wider public? I am a little sceptical about the new clause, because I do not think it would have the effect that the hon. Member for Dundee, East desires it to have. It could have the consequence of adding burdens to HMRC by getting it to test out the legal aspects of these schemes and checking their detail, thereby adding costs to the taxpayer when we want HMRC to work on supporting the taxpayer.
	On the onerous nature of introducing anti-avoidance procedures, I was not entirely persuaded by the arguments made by the hon. Member for Southport (Dr. Pugh) on amendments 34 and 35. My reading of schedule 17 suggests that it already contains the power to tackle some of the abuses that might arise through the more streamlined nature of the reporting rules, and there is provision for secondary legislation to address certain issues, including about the valuation of a transaction or event. We need to get the balance right between promoting compliance through reporting and ensuring that the rules are right in the first place.
	On Government amendments 41 and 42, we are delighted to see that the Government have recognised the wisdom of my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands). In introducing them, the Financial Secretary gave the sense that it was almost to be expected that they would be tabled on Report, and that we should not be surprised to see them on the Order Paper. In Committee, he gave a slightly different interpretation, saying:
	"The Opposition amendment is broader in scope but has some technical difficulties. The reference to a taxing authority would be novel in tax law and its effect is not altogether clear." ——[ Official Report, Finance Public Bill Committee, 16 June 2009; c. 393.]
	Clearly between 16 June and the day when the amendments were tabled, the Government recognised the wisdom of my hon. Friend's remarks, and I am pleased to see them form part of the Bill.

Stephen Timms: We have had an interesting discussion about new clause 5, on pre-commencement notification. The hon. Member for Dundee, East (Stewart Hosie) raised the matter in Committee, and I subsequently wrote to him to clarify the position.
	HMRC already operates a clearance regime under code of practice 10, to which the hon. Gentleman referred, in cases in which the application of recent legislation to planned transactions is uncertain. As we can all see, when legislation is new there could well be uncertainty about exactly what it means. In that situation, a clearance regime is appropriate so that people can discuss with HMRC whether the transactions described will work in the way that is intended, particularly in the case of larger businesses. Such businesses have access to a clearance system in wider circumstances, following the implementation of Sir David Varney's recommendations on HMRC's links with them.
	However, as the hon. Gentleman rightly said, HMRC will not entertain requests for clearance if it is obvious that the motive behind the application is to avoid tax. That policy is understood and accepted by the various professional bodies, and it is well established. I suggest to him that there is no good reason to change the policy on a situation in which disclosure will, by definition, involve arrangements that are intended to obtain a tax advantage as a key benefit.
	I agree with the hon. Member for Fareham (Mr. Hoban) that the problem is that if such a facility were offered in practice, scheme promoters would take advantage of it by continually devising variations on schemes and making more changes to them until they eventually found one that worked. We would all agree that avoidance is not acceptable behaviour, and that we should not effectively ask HMRC to become complicit in avoidance by offering its promoters such a refinement service, which I fear is what would happen.

Stewart Hosie: I understand the arguments that the Financial Secretary and the hon. Member for Fareham (Mr. Hoban) are making, but is the point not that promoters are already finding schemes that work, and that the Government, the House and the Revenue are having to find and fix retrospectively, rather than saying in advance, "Yes, this may well work, but we're going to outlaw it, and perhaps it would be better if you didn't promote it in the first place"?

Stephen Timms: The problem is that new clause 5 would help the promoters of avoidance. It would give them advice and help them clarify whether their avoidance product would work. I am sure that the hon. Gentleman accepts that HMRC should not provide such help. However, I am not averse to proposals to tighten up the way in which we tackle tax avoidance. As I shall explain shortly, we have done a great deal on that, much of which has been effective. I am certainly not saying that there is nothing further to do—there may well be—but new clause 5 would have an undesirable impact.

John Redwood: How do Ministers satisfy themselves about the tax affairs of the banks that they own on behalf of the taxpayer? How can they be sure that those large losses are entirely justified on trading and other grounds? Are they sure that the banks need not pay any tax in the current situation?

Stephen Timms: That is a matter for HMRC, but I am sure that the right hon. Gentleman has seen the code of conduct for bank tax, which we published recently for consultation. Undoubtedly, some of the activities of banks in the UK have involved avoidance—in some cases, significant avoidance. Banks are in a strong position to indulge in that sort of behaviour because they can do it for their own part and then advise their clients on similar approaches. I agree with the right hon. Gentleman that it is right to be vigilant about banks' tax submissions, but if he takes the opportunity to read the code of conduct that we have published for consultation, he will see the steps that we are taking to make progress on that.
	Information provided by a promoter is often insufficient to tell HMRC whether the scheme will work. In some cases, the scheme will turn on a novel interpretation of the law and, in the end, that can be tested only in the courts. It is not enough in some circumstances for HMRC to examine the scheme and decide whether it will work. Ultimately, it will require a decision by a court. In other cases, a scheme's effectiveness will depend on the specific facts to which it is applied. In those circumstances, HMRC could be in a position to say whether the scheme works only when it features in a tax return. Providing the clearance under new clause 5 could therefore prove difficult.

Rob Marris: I have much sympathy with new clause 5. However, as constituency Members, many of us are faced with the problem of planning applications, whereby a planning application is made to the local council, it gets turned down, for which reasons are given, but goes back in a month later, after it has been tweaked. There is wave after wave of planning applications until one gets through. At least the local authority can charge for that. Does not new clause 5 run the risk of causing similar problems for HMRC?

Stephen Timms: My hon. Friend is right. That is precisely the danger to which new clause 5 could give rise, with the difference that building something or progressing with a development is, in principle, good and laudable, whereas avoiding tax is not. There is therefore an even stronger reason not to follow that route.
	New clause 5 states that HMRC will have a "reasonable" amount of time to comply with the clearance request. Again, I agree with the hon. Member for Fareham. What constitutes "reasonable" in that context? It can take a considerable time before HMRC is in a position to make such a judgment and it could easily be impossible to do that in a time frame that might be considered reasonable by the taxpayer. I therefore question the usefulness of that sort of clearance to those who are genuinely trying to pay the right amount of tax at the right time, and I strongly argue against adopting the new clause because it would help those whose purpose is purely and clearly to avoid tax. As I said earlier, however, that is not to say that I want to close the door on tightening the disclosure arrangements. Indeed, there may be opportunities for us to do that.

Rob Marris: My understanding is that when HMRC is involved in anything like that, as it is on occasion, it does not charge people. However, if new clause 5 were to be accepted, we could see not only wave after wave of applications made, as I said earlier, but tax-avoiding accountancy firms, as it were, apparently getting free accounting advice from HMRC, a point to which the hon. Member for Fareham (Mr. Hoban) adverted earlier.

Stephen Timms: I share my hon. Friend's concern about what we might find ourselves getting into. On the other hand, however, I suppose that one could argue that charging for the service might add a further degree of legitimacy to activity whose illegitimacy one would otherwise want to underline throughout. However, we should not be giving that kind of advice at all, so for now we can perhaps leave the question of whether it ought to be charged for.
	Let me respond to another point that the hon. Member for Dundee, East made. HMRC receives a significant number of disclosures every year, but only a proportion of those lead to legislative measures. He raised the issue of promoters selling abusive tax-avoidance schemes. As he will know, we have announced that HMRC will take forward discussions to improve the avoidance disclosure regime. There may well be things that we can do, and HMRC is consulting on working with tax agents.
	That brings me to the points made in this debate, not least by my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher), about having a general anti-avoidance rule. Let me say to my right hon. Friend and the House that we want to keep that question under review. It was consulted on in 1998, as was said by the hon. Member for Stockport—

John Pugh: Southport.

Stephen Timms: I beg the hon. Gentleman's pardon—I have made that mistake before.
	When we consulted on the idea there were a lot of objections, and they were by no means all from tax avoiders. Those who have pointed out that other countries have such a rule are right in terms of a number of counties, although interestingly, the United States does not have a rule of that kind. Some people have argued that if we introduced a general anti-avoidance rule, we would have to have what is suggested in new clause 5, which stands in the name of the hon. Member for Dundee, East, namely a fairly comprehensive clearance system, which would potentially be costly to provide. Another downside would be the uncertainty that such a rule could generate.
	We have, of course, introduced a number of effective targeted anti-avoidance rules, and we will continue to evaluate the benefits of going further and specifically consider the possibility of a general rule. However, I want to underline the fact that, in recent years, we have done a great deal to tackle avoidance. We have a strong strategy and a good track record on tackling tax avoidance in all its forms. We reckon that the steps taken as a direct result of the disclosure regime, which has been in place for five years, are so far responsible for closing £11 billion of avoidance opportunities.
	We have led internationally on increasing transparency through the G20 and the growing number of tax information exchange agreements, and I have already mentioned the innovative code of conduct for banks that we published for consultation recently. We have also led on modern legislative approaches, such as the new principles-based legislation, of which there are examples in the Bill, in clauses 48 and 49, which give new opportunities for transparency. Also, through the targeted anti-avoidance rules, we are ensuring that businesses and individuals pay their fair share.

Michael Meacher: My right hon. Friend mentions the code of conduct that has just been published. Does he really believe that a voluntary code of conduct is going to be adequate to deal with the shark pool that is involved in City tax avoidance? Has he looked at the Australian anti-avoidance principle, which has worked for years? I am not aware that it has any significant disadvantages but, if it has, will he tell us what they are?

Stephen Timms: My right hon. Friend asks whether I think that a voluntary code of conduct for banks will be effective. Yes, I do. I have spoken to some very hard-headed individuals who have looked at these matters, and they also think that it will be effective. Once a bank has publicly committed to the code, it will have certain obligations. Its auditors, for example, will want to take a view on whether it has correctly implemented the terms to which it has signed up. Part of the code that we have been consulting on involves determining what sanctions would be appropriate if deliberate non-compliance were to be found. We have suggested in the consultation document that if, for example, we identified an individual in a bank who was responsible for deliberate non-compliance, we would make a report to that individual's professional body. My right hon. Friend ought not to be misled by the proposal for a voluntary code into believing that it will not be effective. Based on the way in which we have drawn it up, I believe that it will be. We are consulting on this at the moment and we want to listen to the views of everyone who is in a position to comment on our proposals.
	We are aware of the Australian rule, and we keep a close eye on developments elsewhere around the world. I am not in a position at the Dispatch Box this afternoon to set out a detailed analysis of the effects of the introduction of that rule, but I underline that we want to keep under review the question whether it would be appropriate to go down the road that new clause 2 would lead us.

John Pugh: The Minister has stated a preference for targeted measures, and I understand the strategy that is being followed. However, there comes a point at which, when we look at all the targeted measures, we find that there are certain principles underlying them. Does not that make a case for some sort of cull—a statement of general principle or general anti-avoidance rules?

Stephen Timms: We had a discussion in Committee about principles-based legislation, and we have some examples of it in clauses 48 and 49 of the Bill. This is novel; these matters have not been legislated for in this way before. I believe that, as a result of adopting and making acceptable this new approach to legislating, some new opportunities might well arise that could shift the argument somewhat on whether a general anti-avoidance rule would be appropriate. As I have said, this matter is something that we want to keep firmly in our sights.
	I do not want to leave the House with any sense of complacency about this. The changes that we are debating in the Bill will raise more than £1 billion in tax, through blocking avoidance, and protect revenues of a further £3 billion by 2010-11. We are looking at further ways of extending and improving the disclosure regime, and we are considering the application of the principles-based approach to other matters.
	My right hon. Friend made a point about people devising schemes just after publication of the Finance Bill, and he is absolutely right: there will never be a shortage of inventiveness and energy in terms of avoidance. The Government need to be extremely vigilant in response. However, we can do as we did in this case, which was quickly to announce to the House that we were going to close a particular avoidance opportunity. It might take a while to implement the required legislation, but we can implement it with effect from the date of the announcement made in the ministerial statement. We would not have to wait for the legislation in order for the closure to take effect.

Rob Marris: Will the Minister say a little about the Ramsay case—I think it is the Ramsay case—to which I have already referred, which relates to a Court of Appeal decision of, I believe, 1985? It deals with artificial economic arrangements developed solely for the purposes of tax avoidance. As I understand it—this is dragging my memory back more than 25 years—such arrangements were banned by the Court of Appeal.

Stephen Timms: I must say that, as so often, I am very impressed by my hon. Friend's expertise and memory. Sadly, I am not in a position to present the House with details of that particular case. I certainly think that he is right that decisions like that one have constrained some of the activity that certain companies have wanted to indulge in. Sadly, however, there is still quite a lot of latitude available, which is why we have had to take steps such as those outlined in new clause 8. I will refresh my memory on that particular case; perhaps my hon. Friend and I can discuss it separately.
	If we were to go down the road of issuing a general rule or principle, we would have to consider a range of factors: the impact on certainty for people and companies, the issue of whether a clearance system would be needed, the effect on the rest of the tax code and whether we would need to repeal parts of that code. Countries such as Australia that have general anti-avoidance rules often find that they still need some specific rules in addition to support the overall scheme, so we would also need to reflect on that. We would certainly need a full consultation before we opted for such an arrangement. I am nevertheless grateful to those who have raised this important topic—one that we must keep within our sights.

John Redwood: Does the Minister think that big banks such as RBS and Lloyds HBOS in the public sector should be paying corporation tax, and when might they start paying it again?

Stephen Timms: As soon as they are making a profit, they should undoubtedly pay corporation tax.

Peter Bone: Is the Minister therefore saying that all losses incurred—I emphasise all losses—will not be carried forward against future profits?

Stephen Timms: No, I am not saying that. The hon. Gentleman will know from the context of discussions about the asset purchase scheme that that matter has been debated and arrangements have been made for those two banks that are, in fact, rather different.
	The hon. Member for Southport (Dr. Pugh) suggested that HMRC was playing blindfolded, but I do not think that that is right. As I have said, the anti-avoidance steps that we have taken have been pretty effective. The 2004 disclosure regime has been successful—it was pretty controversial at the time and was certainly innovative—in protecting more than £11 billion. HMRC anti-avoidance teams use the information provided to combat avoidance schemes every day.
	Amendments 34 and 35 would both widen the scope of the new reporting rules introduced in schedule 17, which we debated in Committee. The schedule repeals existing rules and introduces a new post-transaction reporting requirement for corporation tax targeted at transactions posing a significant risk of tax avoidance. This requirement applies to certain transactions involving foreign investments whose value is in excess of £100 million. Targeting the reporting requirement in this way removes the need for businesses to report comparatively low-value transactions that are unlikely to give rise to tax avoidance, so significantly reducing the administrative burden compared with the current Treasury consent rules. As we discussed in Committee, those rules are rather elderly and in some respects not wholly appropriate to how businesses now operate.
	Amendment 34 would make any transaction reportable where it is part of a transaction exceeding £100 million. I well understand the concern expressed by the hon. Member for Southport about the possible use of fragmentation of transactions as a means of getting round the new arrangements. I suggest, however, that that problem has already been effectively dealt with by the regulations introduced by schedule 17, drafts of which I supplied to members of the Public Bill Committee. Those regulations provide that, for the purposes of the £100 million threshold, "transaction" is defined broadly and includes a series of transactions entered into in pursuance of the same arrangement. That means that the valuation of a transaction must take into account a linked series of transactions, although they may be strictly separate. I hope that, on that basis, the hon. Gentleman will accept that his amendment—which addresses a perfectly proper concern—is unnecessary.
	Amendment 35 would widen the scope of the reporting requirement by removing the exclusion for trading transactions. Trading transactions have been deliberately excluded because the new reporting requirement, like the previous rules, is targeted at changes to the capital structure of multinational groups, which, by their nature, will not generate transactions of the type that the amendment addresses. The reporting requirement is only one tool available to help HMRC to combat tax avoidance. The removal of the exclusion for trading transactions would be very likely to generate a great many unnecessary reports. I hope the hon. Gentleman will accept that the reporting requirement introduced by schedule 17 strikes the right balance between Exchequer protection and administrative burdens on business.
	The hon. Gentleman mentioned that, in 2005, my right hon. Friend the Member for Bristol, South (Dawn Primarolo), the former Paymaster General, had said that the Treasury consents regime ought not to be repealed because it protected a great deal of revenue. Removing the need for companies to apply to the Treasury for consent before entering into transactions allows businesses to enter into commercial transactions in a way that they see fit, in line with modern business practice. By targeting the new reporting rules at transactions that pose the highest risk of avoidance, we are ensuring that tax revenue is still sufficiently protected. The de minimis limit reducing the amount of information that is reportable will significantly reduce the administrative burden of complying with the rules.
	I think that we have got the balance right, but I am grateful to Members who have raised important issues. I hope that the House will agree to the Government new clause and amendments, and that the other new clause and amendments will not be pressed to a Division.
	 Question put and agreed to.
	 New c lause 8 accordingly read a Second time, and added to the Bill.

New Clause 1
	 — 
	Implementation of section 1

'(1) The rates charged by virtue of section 1 shall not have effect until such date as may be appointed by order made by the Treasury.
	(2) No such order may be made until the Chancellor of the Exchequer lays before Parliament a statement that, in his opinion, measures have been taken to ensure that no person is worse off by reason of the person's income not being sufficient to secure that the effect of the abolition of the 10p starting rate has been entirely offset by the reduction of the basic rate, which took effect in the tax year 2008-09.
	(3) The power to make an order under subsection (1) shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.'.— (Mr. Frank Field.)
	 Brought up, and read the First time.

Frank Field: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following:
	Amendment 2, in clause 1, page 1, line 8, at end insert—
	'(3) This section is subject to section [Implementation of section 1].'.
	Amendment 37, in clause 3, page 2, line 10, leave out '£6,475' and insert '£10,000'.
	Amendment 40, in clause 6, page 3, line 7, at end insert—
	'(3A) At the end of section 646(8) of ITTOIA 2005 (adjustments between settlor and trustees etc.), insert—
	"(9) A settlor of a settlement in respect of which he is liable to pay income tax under section 624 or 629 is entitled to receive credit for any income tax paid by the trustees of such a settlement in calculating his income tax liability and to be repaid any excess of that credit over that liability.
	(10) A settlor who receives a credit under subsection (9) above is to that extent not entitled to recover any tax from the trustees under subsection (1) above."
	(3B) The amendment made by subsection (3A) shall be deemed to have effect from 6 April 2006.'.

Frank Field: I have been in the House for 30 years, and have moved many motions on new clauses and many amendments. I have always taken real pleasure in doing so, but I cannot say that I take much pleasure in moving this new clause, or from the feeling that we are somehow on course for a collision with the Government over the treatment of many people in our society who earn low wages.
	Political parties, whatever part of the House they occupy, are broad coalitions, containing people of diverse views, but they also have core values which keep them together. There is clearly a huge divergence of views on the Labour Benches among Members who have been in the House for some time and those who have arrived more recently, and among those who think of themselves as traditional or old Labour, those who think of themselves as new Labour, and those who simply think of themselves as Labour. However, the golden thread that links us is that, when push comes to shove, we are all on the side of the poor.
	The Government have taken a number of measures of which Labour Members, and, I hope, those in other parties, can be proud. They have tried to move life chances towards those who generally have least, and, if need be, away from those who find it easiest to make it to the top. Therefore, there was in the beginning puzzlement, which turned to anger, that in the 2007 Budget the Government announced the abolition of the 10p starting rate of tax accompanied by a 2p reduction in the standard rate of tax. Since coming to this House I have been an advocate for cutting taxation and particularly the direct rate of tax, the headline rate with which the people whom I represent are massively concerned. It determines whether they take a job, whether they work longer hours and so on.
	I was staggered, as were other hon. Members, that that 2p reduction in the standard rate of tax was largely—although not totally—paid for by the abolition of the 10p starting rate. The cost of the 2p reduction was about £9.5 billion; the extra revenue from abolishing the 10p starting rate was about £8.5 billion. We found ourselves for the first time that I can recall advocating a measure that increased the tax burden on the lower paid and made it easier for people such as me, other Members and millions of people outside the House of Commons. It flew in the face of our understanding of what Labour is about: being on the side of the poor.
	It is true that it took a little time for Treasury Ministers to recognise that there was not just an issue here, but that it was something that cut to the quick most of us who have devoted our lives to public service. We were anxious to see measures that would offset, as far as humanly possible, the additional tax burden that we had placed on the people taking home the smallest wage packets. The Government, to their credit, have introduced a number of such measures. They have changed benefit rates and protected those over retirement age who would have lost out by increasing the tax allowances, so that the sums they would lose would be met. I note that others may wish to raise the fact that those who retired before 65 would not receive the same protection as older people, such as me.

Mark Fisher: Is my right hon. Friend certain about what he is saying about pensioners? I think there is a popular misconception along the lines he is describing. My understanding from pensioner constituents is that a pensioner must have an income of over £22,000 to gain from the measure and that anyone with an income below that amount will be worse off.

Frank Field: I will very happily stand corrected and I hope that my hon. Friend catches your eye later, Mr. Deputy Speaker.

Sally Keeble: My right hon. Friend is right to refer to pensioners such as himself. Male pensioners who retire at 65 get the allowance but women pensioners who retire at 60 do not. Does he agree that they have missed out?

Frank Field: They certainly have. I repeat that I hope my hon. Friend the Member for Stoke-on-Trent, Central (Mark Fisher) catches your eye, Mr. Deputy Speaker, to develop his point.
	There have been benefit changes on top of tax allowance changes for us pensioners. There have been two welcome and major initiatives in the Budget, presented to us as mitigating the effects of the abolition of the 10p rate.
	The first major point is that since the announcement of the abolition of the 10p rate, there have not been specific tax changes relating solely to those who have lost out from the abolition. In the initial statement the new Chancellor announced a £2.7 billion package which increased tax allowances by about £600. That applied to all of us, however. We in this House benefited from that; we benefited from the 2p increase as did those on the 10p rate, and there was also a more recent increase in tax allowances across the board, which we again benefited from, as well as the people who lost the 10p rate. Therefore, the relative tax burden that the abolition of the 10p rate placed on the poorest earners in our country has not been rectified.
	My hon. Friend the Member for Hyndburn (Mr. Pope) and I wrote to the Chancellor three months ago to say that that is still a big issue. We did so not simply for our consciences' sake, as conscience is magnified because by next May or June we will have to face the electorate, and there are quite a lot of low-paid workers out there who might not be writing us letters any longer—they may have given up on that effort—but who still feel aggrieved that we made the move in the first place, and some of whom also know that they remain worse off in money terms compared with 2007 despite the increases in personal tax allowances.
	So although I welcome all the moves that the Government have made, I am also puzzled. Labour Members' grievance with the Government was that, with the new disadvantages we had placed on the poorest earners in our society, there were no specific measures aimed at rectifying this change that we had brought about. This was not an act of nature; we did it. I cannot be the only MP who has received letters from constituents saying, "Please persevere. I understand why the Government are finding billions and billions of pounds to bail out the banks. I accept that it may well be necessary to do that, but we have needs as well." Their grievance is that although we could find all that money for the banking system, it appears that in this Budget and previous Budgets we have found general changes that benefit all of us but we have not specifically managed to rectify the increase in the tax burden that our Government have brought about for those who earn the lowest wages in our society.
	When my hon. Friend the Member for Hyndburn and I first went to see the Chancellor days after he was appointed to that office, he was as courteous as ever and asked, "Well, how would you solve the issue?" This was before the Government found £2.7 billion to make the general increase of £600 in tax allowances. We suggested that the best move would be to increase tax allowances across the board to ensure as far as humanly possible that there were no losers, but that that increase should then be clawed back from all of us who had been the gainers from the 2p rate by increasing national insurance. My hon. Friend and I left that proposal with the Chancellor.
	The next part of this saga took place on the morning that the Government announced they would increase tax allowances for all of us. The Chancellor phoned me and said, "There will be a statement this afternoon. I can't tell you what's in it, but I hope you will like it". As I am on the same political side, when I came to the House I wanted to say as much as possible in favour of the measure, but I cannot describe the depth of my despair as I heard the Chancellor saying there was going to be a universal increase but there would be no clawback. It is true that I welcomed that package. Who was I to stand up when the Chancellor had found £2.6 billion and spit on his feast and say this is not what is actually required, especially as I hoped that we might at a later stage get him to tailor that measure to help the lowest paid and claw the necessary sums back off the rest of us, and in so doing help to balance the books?

Jeremy Browne: Was not one of the strange features of the Chancellor's compensation package that, although it had the advantage of simplicity, the majority of the £2.7 billion was given to taxpayers who had not lost as a result of the doubling of the 10p rate?

Frank Field: I agree entirely. We benefited by the 2p rate reduction—I say "we" because those of us in this Chamber benefited.

Jeremy Browne: rose—

Frank Field: Is the hon. Gentleman going to declare his earnings at the higher rate now?

Jeremy Browne: My earnings are those of a Member of Parliament. To be fair to the Government, I understood that the threshold was adjusted when people went to the top rate, so basic rate taxpayers, including some people on good salaries, did benefit substantially but anybody who earned over the higher rate threshold did not benefit, because the two measures cancelled each other out.

Frank Field: The hon. Gentleman is perfectly right, and the figures, if they are to be trusted, show that 2 per cent. of people did not benefit in this way. When I said "we", I was trying, perhaps too crudely, to identify us with our constituents for once, given the yawning gap that has become apparent in the recent past.
	The substantive point remains that although moves have been made to compensate those whose tax burden increased—that was not the rich or the very rich, but the poor; it was those who earn least in our society yet still turn out to work—the Government prefer to add in all the changes that they make in order to work out who still has not been compensated fully for the abolition of the 10p rate.
	So let us assume, for the moment, that we have given up trying to obtain a targeted package to meet the increase in the tax burden of those with the smallest wage packets and we have gone down the Government line of, "Well, it was to help them as well, and in these difficult times we are not that interested in maintaining tax equity. People got more money." Let us examine what the figures show.
	Were the increases in the tax allowances—the £600 and then the £130—really meant to help those who lost out in the abolition of the 10p rate? The following figures come from the Treasury. By 2010-11—not today, but then; these figures presumably take into account some other changes that might be made—500,000 households will still be losers from this abolition, within those households there will be about 1.3 million individual losers, and the average sum that they will lose will be between £2 and £3 a week. I hope that most of us would think that £2 or £3 a week is a substantial sum for us, but it is huge for people whose earnings are low. I am humbled when constituents come to my surgery to tell me that they are on £11,000 a year, they have two children they are bringing up brilliantly and they are being messed around by tax credits, yet they still survive. If this House ever wants to know how to manage the national accounts, it could look to Birkenhead, where quite a few people could teach us a thing or two.
	Those Treasury figures on the losers still assume a 100 per cent. take-up rate for tax credits. Fortunately, because many of the losers who have children are so desperate, they will have claimed tax credits—whether or not they wish to do so and whether or not they think that to do so is noble—because that extra money to balance the books is jolly helpful. Many of the losers in those figures will thus be people who do not have children, and we know that the take-up rate among that group is about 20 per cent. The Government's calculation assumes that the take-up rate is 100 per cent., but even with such a rate 500,000 households will still be losing out in the financial year 2011-12, those households will contain about 1.3 million individuals who are losing out and, on average, those individuals will, even years ahead, still be losing between £2 and £3 a week.

William Cash: I thoroughly endorse what the right hon. Gentleman says, for all the reasons that he has given. He mentions the year ahead. Does he agree that if we take into account the real figure for public net debt, which is now £3 trillion—not the £1 trillion the Government say—the increases in taxation that are due as a result, together with the necessary reductions in public expenditure, will have a devastating impact on the less well-off and will make their situation intolerable? In other words, we really will have two nations.

Frank Field: I do not dispute that point, and the hon. Gentleman may be able to make his case later in the debate.

Stephen Timms: I am listening with great interest to my right hon. Friend, and I wish to take issue later with some of his figures. He mentioned 1.3 million individuals —is that an estimate of the number of people in the 500,000 households that the Government have confirmed will remain losers from the effects of these various changes?

Frank Field: I confess that I do not know the answer. I am merely reciting the IFS figures. Today it said that 500,000 households would lose, and 1.3 million individuals. I assume that most of those individuals will be in those households. If our constituents were asked whether they believed the Treasury or the IFS, they would probably side with the IFS.

Stephen Timms: Actually, we had a call from the IFS to ask us where the 1.3 million figure came from, so this may be a circular argument. It may be that 1.3 million is an estimate of the number of individuals in the 500,000 households. There is no dispute that 500,000 households will be—modestly, I would argue—less well-off as a result of the series of changes that have been made over the last couple of years. I was not sure where the 1.3 million figure came from, and my right hon. Friend appears to be saying that he is not sure either.

Frank Field: Well, I am sure, because it comes from the IFS. When I was broadcasting with representatives of the IFS today, they said that that was their estimate.

John Gummer: Does the right hon. Gentleman accept that these relatively small amounts of money are in fact large amounts of money, not only in the areas where deprivation is traditionally widespread but in constituencies such as mine? Rural areas can have large numbers of very poorly paid people with large families, to whom these are significant sums. I agree with him that there is nothing as humbling as meeting at one's surgery people who make do with very small amounts of money and have come to talk to their Member of Parliament about £1, £2 or £3 less a week in circumstances that should never have arisen.

Frank Field: I am sure that those sentiments are reflected on both sides of the House. The disappointment that I feel can be summed up as follows. I am not trying to decry the moves that the Government have made to try to rectify the unnecessary burden that we have placed on some of the poorest households in this country—a burden that would be unforgivable if it were a Tory Government doing it, and is even worse because it is our Government. Of course there are real problems now with the Government finances. I am even more of a hawk on this issue than those on the Treasury Bench, because I think there will be real problems in the short term in trying to float the gilts that we will need to float to reach the medium term, unless both Front-Bench teams show far greater resolution about the need to bring public expenditure into line with tax revenue. I want us to lead that debate because the sorts of reforms that I wanted to see and that we did not see in the last 12 years or so, when we had huge amounts of money to spend, might well be brought about when we have to think about what the Government's priorities are and how we can ensure that our resources are concentrated on them.
	I am not trying to downplay the real difficulty that the Government have in balancing the books and getting us to the medium term so that some of these changes in public expenditure and taxation can come into effect. The sums that we talking about to bring justice to the group of people who earn the least are modest compared with the size of the deficit that has been revised, in a major way, three times since last November. I cannot believe that there would be any risk to the currency or any risk of encouraging a gilts strike if the Government were to make modest new claims on debt to meet the honour that we owe this group of our constituents.
	I said at the beginning of my speech that for 30 years I have spoken always with pleasure, jumping up to make a suggestion and thinking that it would somehow be accepted. I know, however, from the conversations that other Members have had with the Government that the Government have dug in on this point. They are playing for very high stakes tonight. I hope that when those on the Treasury Bench contribute to the debate they will say more than we have heard from the unofficial sources during the day. If all we are offered, yet again, is warm words, my thinking is that we should press the new clause to a Division.

David Drew: I want to hear those redistributive noises from those on the Front Bench, and I am looking forward to hearing what they have to say. My right hon. Friend knows that the only caveat to my support for his new clause is that the 10p rate had a secondary redistributive effect on the number of people post-60 who chose to redistribute their leisure for their working time. How would he answer the allegation that that was a downside of the 10p rate, notwithstanding those that it was there to help?

Frank Field: I have been bending over backwards not to suggest this is a very easy thing that fits into nice little boxes. There are clearly what my grandmother would have called swings and roundabouts, and I accept my hon. Friend's point, but I nevertheless believe that the main thrust of the argument that Labour Members have made remains.
	If we win the Division on the new clause, we can proceed to approve the rest of the Budget but before the tax changes come in the Government have to give us more than warm words—they have to give us some reassurances about the moves that they intend to make. Some of us have been told that that is pushing the nuclear button, and that if we win the Government will not be able to raise revenue after 6 o'clock tonight and that tomorrow morning the currency will collapse—with all the horrors that would stem from that. It would be ludicrously irresponsible if the Government did not have a plan 2 ready. If the new clause is carried tonight, surely they will jump up and say, "Clause 1 and the tax-raising powers in the Budget are a matter of confidence and we are going to make you pass it this evening. We will not go into the night leaving this on the statute book." Of course, they would get it more easily if they showed a little more humility than has perhaps been shown so far, by saying that they will also make moves to rectify the injustice of the 10p changes. There are those of us who feel in our bones that we have caused this injustice, that it is up to us to put it right, and that this is our last opportunity to do so before we face the electorate, and the Government underestimate our resolve if they think we should just let it go.
	We all act for a multiplicity of reasons. Dr. Johnson said that the realisation that one is to be hanged in the morning "concentrates the mind wonderfully", and we know that, come next May, we will have to face our executioners. They will decide whether we come freely back to this House, and that should concentrate minds of those on the Treasury Bench about our resolve.
	I talked earlier about the golden thread that knits together all Labour Members—new, old or ordinary. That thread is the belief that we come to this place to protect and advance the interests of those who get least from life. The 10p proposal is a denial of all that we came into public life to achieve, and this is our last chance to rectify the situation before the general election.

Mark Hoban: It is a pleasure to follow the right hon. Member for Birkenhead (Mr. Field), who spoke in his typically understated fashion but with great passion and strength of conviction. Everyone in the House will have listened to him very carefully.
	Before I talk about new clause 1, I want to make brief mention of two other amendments in the group. Amendment 40 in my name is a fairly technical proposal about settlor-interested trusts, and I shall not detain the House long with it. The nature of the trust and the interest that the settlor has in it mean that both the trust and the settlor are liable to pay income tax on the trust's income. The trust pays the tax at the higher rate, which is currently 40 per cent. but which will rise to 50 per cent. if the Government's plans go through. In contrast, the settlor pays at his highest marginal rate—that is, the 20 or 40 per cent. that obtains at the moment, or the 50 per cent. that the Government propose.
	However, the problem is that there appears to be double taxation of that income. HMRC provides a credit to the settlor for the total tax paid by the trustees. That offsets exactly the tax due for higher rate taxpayers but, where the offset is not exact because the settlor is a basic rate taxpayer or has unused allowance, the settlor is obliged to pay any excess over to the trust.
	Before the trust regime was changed in 2006, the credit that I have described was provided as of right. Following the Finance Act 2006, it is now a concession and there is no obligation on HMRC to continue to provide it in the future. Therefore, the relief could be withdrawn at any time, and the first part of amendment 40 would ensure that it remained available. I do not think that the Government ever intended to create this uncertainty in the first place and the first part of the amendment would put the legislation on a proper footing by making sure that the concession had the force of statute.
	The second part of amendment 40 clarifies that, if a credit is given, a settlor cannot also claim tax liability from the trustees. At present, that can happen when trustees have still to pay the income tax due on trust income when the settlor files an income tax return. In those circumstances, there is nothing to credit from, so the settlor has to pay up and then claim back the sum directly back from the trust. It is difficult to explain how the trust eventually resolves its liabilities and I shall not go into fine detail now, but I believe that the amendment would solve that problem too.
	Although amendment 40 addresses a gap in the trust law that is three-years-old, the changes proposed in clause 6 to the trust's rate of tax have made the issue more pressing. The trust rate paid by the trustees and the marginal rate paid by the settlor are likely to differ when the Bill comes into effect next year. Most settlors will not earn enough income to pay income tax at the additional rate, so the onus will be on the trustees to make the settlor repay the difference under the current legislation. It is therefore all the more important to ensure that a settlor can rely upon HMRC's concession in order to meet these payments. That is best achieved by providing a statutory basis for the concession.

Rob Marris: As a matter of interest, on amendment 40 to which the hon. Gentleman has just been speaking, can he give an indication of how many such settlors and trustees he thinks there are in Birkenhead?

Mark Hoban: I am not sure that I or the right hon. Member for Birkenhead (Mr. Field) know, or that the Treasury could tell us. Perhaps in his usual perceptive way the hon. Member for Wolverhampton, South-West (Rob Marris) is making a point about the incongruity of the amendment being tabled in this group. That is down to the selection made by Mr. Speaker, not by me. I am not totally unaware of the incongruity of the selection.

Frank Field: Did the hon. Gentleman notice that as Birkenhead was mentioned, the gods showed their displeasure at the fact that we had to have this debate?

Mark Hoban: The right hon. Gentleman has not only tabled the new clause, but has managed to bring the weather on tap at the right time to provide a backdrop to the debate.
	Amendment 37 raises the personal allowance to £10,000. I understand the attraction of that. It would take more people out of taxation. We are not averse to that concept. Indeed, our proposals earlier this year to increase the age-related allowance for pensioners by £2,000 demonstrates an interest in this area, but I am concerned about the potential cost, which I am sure the hon. Member for Taunton (Mr. Browne) will discuss at length. It sounds a potentially expensive way of providing relief to taxpayers.
	The people who would benefit most from the hon. Gentleman's amendment are those who pay the highest rate of tax, not those who pay the lowest rate. People at the highest rate of tax, who pay 40 per cent. at present, will benefit significantly. If the Government introduce their planned 50 per cent. tax rate, those 50 per cent. taxpayers will receive the most benefit. I look forward to the hon. Gentleman's arguments in support of the amendment.
	New clause 1 is the most important clause that we will discuss on Report. The genesis of today's debate lies in the 2007 Budget, where the cut in the basic rate of tax from 22p to 20p was funded through the abolition of the 10p rate. It is worth remembering the words of the then Chancellor, which explain why it took so long for people to recognise the issue to which that gave rise. In the Budget speech he said:
	"Having put in place more focused ways of incentivising work and directly supporting children and pensioners at a cost of £3 billion a year, I can now return income tax to just two rates by removing the 10p band on non-savings income."—[ Official Report, 21 March 2007; Vol. 458, c. 826.]
	I suspect that when that was greeted with cheers from the Labour Benches, people assumed that, in effect, the zero per cent. rate would be extended up to the threshold for the 20p rate, rather than the tax being doubled from 10p to 20p. That is why many people were uncertain what the change meant in practice. In the Treasury Committee's inquiry on the 2007 Budget, the Treasury official responsible for this area of policy was pressed and said that from the Treasury's own statistics 5.3 million households would have lost out from the changes made in the 2007 Budget. However, the Prime Minister, when he was Chancellor, was quizzed by the Treasury Committee and denied that there would be any losers from the change.

John Redwood: Does my hon. Friend think that one of the things that people find very difficult to understand is how the Government can find so much money to subsidise banks to pay colossal salaries to the people at the top of those loss-making publicly owned banks, but cannot find the money to compensate people on very low incomes?

Mark Hoban: Many people ask themselves that question. We have provided significant taxpayer subsidies to those banks, but people then see another situation, such as the one under discussion, whereby the Government refuse to move and pay compensation to people who have lost out as a consequence of the 10p rate. That juxtaposition is very telling and forms part of the continuing anger about the 10p rate.

Rob Marris: Does the hon. Gentleman share the puzzlement of many of us, whereby one reason given for the abolition of the 10p rate was simplification of the tax system—the move to the two rates? He just quoted the then Chancellor on that point, but in that very Budget a 10 per cent. rate was retained for certain low savings income, and in this year's Finance Bill there is incredible complexity in terms of higher rate taxpayers. So, we now have—off the top of my head—about six rates of income tax, not the supposedly simple two rates.

Mark Hoban: The hon. Gentleman makes an important point. Part of the challenge was for the Government to justify why they moved from the previous three-rate income tax system to the two-rate system, and simplification seemed a convenient explanation at the time.  [ Interruption. ] The hon. Member for Taunton asks, "Who spotted this?" May I remind him not only that his party identified it, but that we did? In a press release on Budget day 2007, we said:
	"In his"—
	the then Chancellor's—
	"stealthiest taxes yet, he has paid for his 2p cut in income tax by abolishing the 10p rate".
	I therefore want to lay that myth to rest for the hon. Gentleman and save him having to repeat it again during his remarks.
	Let me remind the House of the losers from the 2007 Budget. There were some 2.2 million single, childless working people who did not get the working tax credit because they earned more than £12,500 a year but less than £18,000, or because they worked fewer than 30 hours a week or because they were too young. They lost on average £125 a year per family. There were 1.2 million two-earner, childless couples who might not have qualified for working tax credits, who failed to take it up or who lost out from the Budget's other changes. Their maximum loss was £464 a year.
	There were 7.7 million two-earner couples with children, and they lost twice through the income tax and national insurance charges but gained only once from the child tax credit and working tax credit reforms. There were people who did not work and lost out because of tax on their benefits. There were 4 million one-earner, childless couples, earning in a range of £17,000 to £18,500, who lost out because they were not compensated.
	There were, as the hon. Member for Stoke-on-Trent, Central (Mark Fisher) said, 300,000 women, aged between 60 and 64 years old, who did not get tax credits but were too young to be compensated by the rise in the pensioner tax allowance. Indeed, in the days after the 2007 Budget, the first letter that I received from a constituent complaining about the measure was written by a lady who fell into that category. She clearly had read well the small print of the Budget and identified that she was in the group that would lose out.
	The average loss per family is about £145. They can be characterised as families who are on low incomes but who fall outside the tax credits safety net; as early retirees; and as people on incapacity benefit. They were caught out by the complexity of a tax and benefit system that the Government created; they were people who lost out from the measure; and they were some of the most vulnerable in society. It was, to reverse a phrase so beloved of the Prime Minister, a tax rise for the many and not the few.
	Despite the warnings on Budget day, and despite the evidence that was given to the Treasury Committee at the time, it is fair to say that the issue was a slow-burner. The scale of the losses came into focus only as the implementation date got closer, and, understandably and rightly, people were angry that the Government had not been clear about the scale. That triggered a significant wave of anger across the country that was reflected in the views expressed on both sides of the House. That is why the Chancellor came to the House on 13 May, part of the way through the Crewe and Nantwich by-election, to announce measures that would offer compensation to some of those affected by the abolition of the 10p rate. In his statement, the Chancellor said that the changes
	"will mean that 22 million people on low and middle incomes will gain an additional £120 this year. It will mean that 4.2 million households will receive as much, or more than, they originally lost. The remaining 1.1 million households will see their loss at least halved. In other words, 80 per cent. of households are fully compensated, with the remaining 20 per cent. compensated by at least half."—[ Official Report, 13 May 2008; Vol. 475, c. 1202.]

Stephen Timms: The hon. Gentleman is giving us an interesting historical discourse on the events of the past couple of years. However, the House is interested to know about the measures that his party favours to raise the incomes of the 500,000 households that we are discussing.

Mark Hoban: That obligation rests with the Minister— he is in government—not the Opposition. We look to him to bring forward proposals to deal with the issue. The Government created the problem, and they need to solve it. They need to live up to the promise that they made in the House.
	Let me move on—

Liam Byrne: Quickly.

Mark Hoban: I do not need to move on quickly, because the onus lies with the Government, not the Opposition, to solve the problem now. The Government have had plenty of time to think about the issue, and they should not be looking to us for ideas to get them out of their hole.

David Drew: May I help the hon. Gentleman—and, indeed, the Government? One of the ways in which we could bridge the financial gap is through much more effective measures to deal with tax avoidance. Would the official Opposition be interested in that?

Mark Hoban: The issue is not about finding the money to pay for the compensation, but about finding a way to compensate people who have lost out as a consequence of what has happened.
	After the Chancellor's statement, a number of people were still losing out as a result of the measure. In its report on the 10p rate, the Treasury Committee said:
	"There is a pressing need for the Government to seriously examine ways in which these remaining households can be compensated...The Government should set out proposals to achieve this by the time of the 2008 Pre-Budget Report."
	The fact that that group of people were still not fully compensated caused continued anxiety across the House about how the issue was to be resolved.

Mark Fisher: Does the hon. Gentleman share my view that one of the things making it impossible for the Government to find a solution is the fact that they are in denial? They do not recognise that they have caused a problem and say that they cannot identify the people who are losing out. I look forward to hearing from Treasury Ministers; I hope that we hear them say this evening, "Yes, we admit that there is a problem and that there are losers. These are the people, and this is how we will solve the situation."

Mark Hoban: The challenge is that the Government already recognise that there is a problem. I noticed earlier that the right hon. Member for Liverpool, Wavertree (Jane Kennedy) was in her seat. Let me remind the House about what she said last year, when she was the Financial Secretary, in response to an intervention from the right hon. Member for Birkenhead; She recognised that there was a continuing problem and said:
	"I want to reassure him that we will return to this issue in the pre-Budget report, as the Chancellor has said, not only in front of the Select Committee but elsewhere. He will bring forward concrete proposals, and they will be implementable as soon as possible."—[ Official Report, 1 July 2008; Vol. 478, c. 741.]
	I thought that a very clear commitment, and I think that the right hon. Gentleman and a number of other Labour Members did too. It was on the basis of the right hon. Lady's reassurance that the hon. Member for North-West Leicestershire (David Taylor) withdrew his new clause at the time.
	So a year ago, a clear commitment was given by the then Financial Secretary—and by the Chancellor elsewhere—to compensate the 1.1 million households that had not been fully compensated. The clear message was that that would happen in the pre-Budget report. The pre-Budget report, of course, has come and gone without the package having been put in place, and that is why we are debating it today. There was an exchange of views between the Financial Secretary and the right hon. Member for Birkenhead about the number of people who had lost out through the scrapping of the 10p rate. The IFS estimates that 0.9 million people are still worse off by more than £1 a week as a consequence.
	We are here to press the Government to come forward with proposals that will compensate those who were not fully compensated as a result of the proposals announced in May last year. The Government cannot cast aside lightly, and without any consequence, the commitments made in last year's debate and by the Chancellor. Having started this process in 2007, having denied that there were losers despite the evidence, having made a concession under pressure last year, and having defused a revolt on Report of the Finance Bill in 2008 by committing to act in the pre-Budget report and yet failing to do so, it is time for the Government to be held to account by Parliament.
	This is not a partisan issue—it is about the House asserting itself and forcing the Executive to live up to the promises that they made to this legislature last year. It is time for the Government to redeem the promise that they made. They have had time to reflect on how to compensate the people who were not fully compensated last year, and to bring forward measures to help those people; in failing to do so, they have broken their promise to the House. We now have the chance, by supporting new clause 1, to force the Government to keep to their promise not only to Members of this House but to the people who have lost out as a consequence of the scrapping of the 10p rate.

Mark Fisher: It is a pleasure to follow the hon. Member for Fareham (Mr. Hoban). I, too, want to concentrate my remarks on new clause 1.
	The problem has been well described by my right hon. Friend the Member for Birkenhead (Mr. Field). Members in all parts of the House regardless of party, and, more particularly, the millions of people who have been disadvantaged by these changes, owe a great debt to my right hon. Friend. Together, he and my hon. Friend the Member for Hyndburn (Mr. Pope) identified the problem initially, persuaded us very early on that it existed, and have campaigned on it consistently over the past two years. Everybody who cares about this issue is greatly in their debt. I hope that that view is shared even on the Treasury Bench, as well as across the House.
	This debate goes right to the heart of what Parliament is about. The essence of what we do is to raise grievances and, in return for the right to do so, vote supply to the Government. I think that not only Labour Members but Members in all parts of the House want the Bill to go through: the Budget has many good things in it, and we want to vote supply to the Government. However, we want to raise what is a serious grievance for many of the poorest people in our society.
	It is right that my right hon. Friend has identified that grievance and articulated it so well. The people who are most disadvantaged by these changes are, as he said, people on the most modest incomes. They come to all our surgeries and talk about it—sometimes not even in terms of pounds, almost pennies, but those sums make the difference between a dignified life and a life that lacks dignity because they cannot participate in society. They are not glamorous sums, which is possibly why the press and other media have been less interested in this grievance than in many others. These changes do not catch the headlines, but they mean a great deal to people who come to our surgeries £50, £100 or £120 a year worse off as a result.
	It is right that this grievance should not only be identified but put right tonight. We will want to vote supply to the Government, but we want them to recognise that grievance, and to recognise that they have caused the problem and it is up to them to put it right. As my right hon. Friend said, doing so would not involve a huge sum; it is perfectly within the grasp of the Government to rectify their mistake.
	Why has there not been a greater outcry? Possibly because, as I said, the losses for any one individual are very small. Ironically, that makes it even more important that they should be addressed. It is also because many people, particularly pensioners, have difficulty in working out exactly how their pension works and what their financial position is. Many of my constituents have said, "I sense that I am worse off under this. I am told that I will be, and I have been to the citizens advice bureau and they have identified that fact, but I do not fully understand it."
	As my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) said, the tax system is so complicated at various times and in various ways that, as we all recognise, the people who come to our advice surgeries do not fully understand the minutiae of it. They do not realise that they are worse off, or exactly what is causing it. That is why we are particularly in debt to my right hon. Friend the Member for Birkenhead and my hon. Friend the Member for Hyndburn. They have identified the problem, with the help of the IFS, and articulated it.
	This debate is about poverty. That is not a fashionable subject, and I regret that the Government whom I have been proud to support over the past 12 years have not often talked about poverty. They have talked about the future, entrepreneurship and the great expansion of our economy, but there are still large pockets of poverty in all our constituencies, in rural areas and in city areas such as mine. That poverty is made worse by the 10p change, and it has been intensified.

Lynne Jones: I think it is unfair to say that the Government have not talked about poverty, but by and large it has been about child poverty or pensioner poverty. They have fallen down in not talking about people who do not fall into either of those categories because they do not have a family and are not pensioners. Those people are the worst off because they do not have extra benefits, and they will be particularly hard-hit by the measure in question.

Mark Fisher: I take my hon. Friend's admonition. Of course Ministers have discussed poverty, but when the story of this Government comes to be written, I do not believe it will say that they have crusaded and pioneered to eliminate poverty generally in our society. Some 12 years on, we still have a residue of poverty.

Karen Buck: Pursuant to the remark by my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones), one thing that causes me great concern is the difficulty of separating out low-earning adult poverty from child or pensioner poverty. Many low-earning adults live in families that have children, and indeed there is evidence that one driver of child poverty is there being adults in the house who are very low earners. Although progress may have been made on specific aspects of poverty, it is critical that we tackle it across the board, including for single earners, as we are seeking to do today.

Mark Fisher: I entirely agree with my hon. Friend, and of course I would want to make the exception, which was implicit in her remarks, that those who earn low wages and are in poverty have been helped remarkably well by this Government. The Prime Minister, when he was Chancellor, introduced tax credits and transformed the lives of many of my constituents who were on poverty wages. It gave them a decent lifestyle. When the people on the end of poor administration of tax credits are examined, the system gets a bad reputation, but it has been a life-changing and life-improving experience for the vast majority of those who receive tax credits. It has tackled implicit poverty among many of our constituents.
	Poverty does exist. It is a low-level condition but a very painful one, and it is Parliament's responsibility to try to put it right, not to make it worse. The 10p change undoubtedly made it worse for many people. Tonight is the time when the Government have to face up to that and recognise that they have got this slightly wrong and can put it right. We owe it to the people affected to correct it, and we owe it to my right hon. Friend the Member for Birkenhead, for his crusade, to put it right tonight. I hope that we will.

Jeremy Browne: I want to limit my comments to new clause 1, which the right hon. Member for Birkenhead (Mr. Field) tabled, and amendment 37, which I tabled. The common theme that links them is the desire of my party and others to help people on low incomes have a higher standard of living and be more self-reliant and less dependent on the state.
	Let me begin with the 10p rate. Members who have perhaps followed matters in less detail than those of us who served on the Committee must cast their minds back to 21 March 2007—nearly two and a half years ago—when the Prime Minister delivered his final Budget speech as Chancellor of the Exchequer. I remember it well because he stood at the Dispatch Box and announced, with great fanfare, the change that we are still discussing more than two years later. I remember Labour Members celebrating with abandon, waving their Order Papers and regarding the speech as a triumph. They left the Chamber in one big phalanx to go to the Tea Room, or wherever they took themselves. They did not want to listen to the comments of politicians from other parties and were confident that the soon-to-be Prime Minister had devised a master plan, which would improve the lives of their constituents. I suspect that the perception that it might ensure a fourth consecutive general election victory for the Labour party also contributed to their misplaced euphoria.

Lynne Jones: May I point out that some of us were less ecstatic than the hon. Gentleman suggests? I well remember making a speech on that day, pointing out that the measure disadvantaged the poorest. I was not particularly in favour of introducing the 10p tax band; I wanted to raise the threshold, which would have been a much better way of helping the poorest people.

Jeremy Browne: I am grateful for that intervention for two reasons. First, amendment 37 does precisely what the hon. Lady said, so I look forward to her supporting it. Secondly, she leads me neatly on to the comments of the leader of the Conservative party. In response to the rabbit that the then Chancellor pulled out of a hat, he said:
	"Well, the Chancellor has finally given us a tax cut."—[ Official Report, 21 March 2007; Vol. 458, c.829.]
	Sadly, perhaps not for the first time, he was mistaken. We had not the abolition of the 10p rate—the term often used to describe the change—but the doubling of it. That left more than 5 million people worse off than they were before the change was made.
	It was argued at the time that simplification was the motive for the change, but as the hon. Member for Wolverhampton, South-West (Rob Marris) rightly pointed out, the system has not become simpler. Indeed, since that Budget, the income tax system has become, if anything, more complicated.
	What happened after that Budget? We finally got the now Prime Minister to accept that there were more than 5 million losers as a result of the change. Initially, he refused to accept that there were losers, and when we got beyond that stage, there was willingness to acknowledge that there were losers but unwillingness to consider compensating them. It seems extraordinary now, but we were told that the size of the budget deficit made it impossible to afford to compensate them. I think it was probably a combination of not wanting to spend the extra money and stubbornness—an unwillingness to believe that the Government had been caught out in an error of such magnitude.
	The decision was then taken in an emergency Budget—that is what it was, in all but name—to borrow some additional money to try to buy off the right hon. Member for Birkenhead and other Labour Members who had suddenly realised, to their horror, that far from being a masterstroke, the measure not only further impoverished some of the poorest in their constituencies, but was likely to be electorally disastrous. This afternoon, we are joined by the hon. Member for Crewe and Nantwich (Mr. Timpson), who offered a vivid illustration of the perils that the Labour party faced if it pretended that the measure was anything other than unpopular.
	I slightly disagree with the hon. Member for Stoke-on-Trent, Central (Mark Fisher), when he asked whether people were always aware of the impact of such changes on their income. I was struck by the fact that members of the London-based media, for want of a better expression, were slow to pick up on how damaging the change was, probably because they are invariably paid far more than those in the losing category. However, my constituents were alert to the downsides. I have been stopped in the supermarkets and in the street more about that issue than about any other in the four and a bit years that I have been a Member of Parliament. They said, "I hope when you're up in the House of Commons you're holding the Government to account on doubling the 10p rate because I'm losing out as a consequence."
	It is also inaccurate to suggest that the measure damages only those on low incomes. Sometimes debate in the House is caricatured as being about us, on our MP incomes, benevolently trying to help people in circumstances of extreme poverty. Some people on very low incomes lost out as a result of the Government's doubling the 10p rate, but many of my constituents, who are on incomes of £13,000, £14,000, £15,000 and £16,000—regarded not as low, but as typical wages for people who work in agriculture, catering or hospitality in Somerset—were also losing out, even when the effect of reducing the basic rate by 2p was taken into account.

Edward Timpson: Does the hon. Gentleman recall that at the time, the effect of abolishing the 10p tax rate on some of the poorest members of our society could be seen most graphically in the payslips that they brought to show us, on which they could see that £2 or £3 was being taken from them every week? They were fully aware of the impact, and that made it even more extraordinary that the Government did not realise that there were many losers as a result of the measure.

Jeremy Browne: That is true. Of course, the measure was not implemented straight away—it was a ticking time bomb, which the then Chancellor oddly chose to put under his own premiership, waiting to blow up when he assumed the post of Prime Minister. Nevertheless, the hon. Gentleman is right that people noticed. It is also interesting to note that the different categories of people who lost out noticed. I, too, received many letters from women aged between 60 and 64, who identified themselves as losing out as a result of the change. Members of another category wrote in smaller numbers. People under 25 on low incomes with no children also lost out. Some brought it to my attention because they had noticed the difference in their payslips. There was generally a keen awareness of the change.
	The Labour party does not do well in my constituency. No one would say that it was an area with a strong Labour tradition, but many people approached me who had not voted Labour, and perhaps would never consider doing that, but were still shocked that a Labour Government had chosen to implement a policy that seemed so precisely to target and disadvantage those on the lowest incomes. They thought, as the right hon. Member for Birkenhead said, that the sole purpose of the Labour party was to help people in those circumstances. They wondered, if it did not do that, what the point of it was.

Richard Bacon: Does the hon. Gentleman agree that there was a keen awareness on the part of not only our constituents, but the Government? Sir Nick Macpherson, the permanent secretary at the Treasury, gave evidence to the Public Accounts Committee at the time, in which he clearly said that a thorough and detailed distributional analysis was done. They knew exactly what the effects would be.

Jeremy Browne: I do not doubt that. There are serious questions about the Prime Minister's judgment, but none about his ability to add up. I think that a cold political calculation was made: people on low incomes have a lower propensity to vote and, if they do, a high propensity to vote Labour, so there was no need to give them any incentives. The now Prime Minister was concerned about people in so-called middle England. He feared that Tony Blair's appeal to those people was greater than his, as Prime Minister-in-waiting.
	The change from a 22p basic rate to a 20p basic rate was therefore meant to send a clear signal to the media and others that the then Chancellor could connect with middle England and, what is more, that he could continue to outflank the Conservative party on the right by achieving a 20p basic rate, which had been an aspiration of Lady Thatcher and others, but which had not been achieved when the Conservatives were in government. He was going to deliver that, even though the collateral damage was inflicted on people on low incomes. Because their votes were taken for granted by the Labour party, however, there was no need to worry about them.

Bob Spink: I am grateful to the hon. Gentleman, who is making a remarkably balanced speech and making a lot of sense. Will he share with the House his party's view of increasing personal allowances, but balancing that by increasing the higher rates of tax, so that we properly target the vulnerable and poorer people in society, which is the right thing to do?

Jeremy Browne: I am grateful to the hon. Gentleman as well. I am building up an unlikely coalition behind amendment 37, which is precisely what I seek to achieve. I will get to that very amendment in a moment and speak to it in slightly greater detail. The situation that I have outlined was the one that the Government faced, and the calculation made was essentially a political calculation.

Peter Bone: I am listening to the hon. Gentleman with great interest. I agree with a lot of what he is saying, but I do not believe for one moment that, in celebrating the cut down to 20p, any Labour Member thought that the poorest in society would be worse off. However, I have not been able to decide whether the move was a Government cock-up or a Government policy. What are the hon. Gentleman's views on that?

Jeremy Browne: My view, for what it is worth, is that the Treasury and Treasury Ministers knew perfectly well and were quite cynical in their calculations, for the reasons that I have just given. However, I think that quite a lot of Labour MPs suspended their judgment and only later came to realise the full and awful consequences of what the then Chancellor had announced. Those consequences were awful for two reasons: first, they fundamentally undermined what those hon. Members had come into politics for, which was to try to help people on lower earnings; and secondly, those hon. Members realised that it would be devastating for them electorally when the electorate woke up to those consequences.

John Gummer: Would there not also be support for that view if one took into account the parallel occasion, when the then Chancellor spoke to the CBI and announced the removal of one of the most important green proposals—the proposal to insist that people report on their carbon reductions—in order to send out a signal that he was on the side of business? This is all part of a sad pattern of attempts to get headlines in the  Daily Mail.

Jeremy Browne: That is an interesting point. I will not be tempted too far off the beaten track, Mr. Deputy Speaker, but when people come—very soon—to write the history of new Labour, the 10p tax rate will be the watershed moment, when the Labour party tried to triangulate its way to the right of the Conservative party, in an attempt to crowd it out and leave it no room to have any electoral appeal. However, that was dependent on the left, as it were, not minding about all the efforts to woo middle England, which sometimes meant neglecting Labour's core vote, and on other occasions meant actually punishing it. The 10p tax rate was the moment when the elastic stretched too far. The interesting point about that decision was that it was announced in the final Budget speech by the then Chancellor. That speech was meant to set up his premiership and begin a new era of new Labour, but as we now realise, it did precisely the opposite: it signalled the end of new Labour and the start of the desperate circumstances that the party of government has been in ever since.
	The new Chancellor of the Exchequer was left in a difficult situation. We all have sympathy for him, just as we have sympathy for the team of Ministers who have to stand up in this debate and justify the position in which the Prime Minister has put them, because it is hard to unravel the proposal without just reverting to the previous situation. Indeed, with the Prime Minister having announced that the 10p rate was an interim proposal and is now in the distant past, the Government are unable to move back to the situation that existed before. What they have tried to do, therefore, is address the concerns raised by the right hon. Member for Birkenhead and others by spending a lot of public money—more public money, interestingly, than it would have cost to revert to the previous situation—targeting those who were losers as a result of the 10p rate.
	However, the problem is that it is hard to do that precisely. What the Government came up with, in their emergency mini-Budget, was a £2.7 billion package, which, extraordinarily, gave money to people earning £20,000, £25,000 or £30,000 a year. Indeed, somebody earning £35,000 a year would have gained from the emergency proposals, whereas somebody on a much lower income would still have been a net loser as a result of those changes. The Government found that £2.7 billion out of nowhere and then blew the vast majority of it on people who were not net losers as a result of the change from 22p to 20p in the basic rate, coupled with the doubling of the 10p rate. That was the most extraordinary act of extravagance, but it was very badly targeted. The proposal was simple to implement, which was its one merit, but it otherwise failed in its objectives.
	Where does that leave us now? It leaves us in an interesting position, questioning the Prime Minister's judgment and the party of government's overall strategy and direction; it also leaves us doubting Labour's ability or desire to help the poorest in our society. Indeed, one interesting thread that runs right through the Bill is the number of measures that it contains that are disadvantageous to people who, in other circumstances, might have thought that the Labour party was on their side. It is interesting, for example, that the group targeted for gambling taxes are the people who play bingo, that there is extra duty on a pint of beer and that people at the lowest end of the income scale have not been compensated for the changes that we are discussing in relation to new clause 1. It is hardly surprising, when one looks at those measures, that so many people across the country are concluding that the Labour party, despite its historical record of commitment to them, no longer appears to be particularly interested in helping them in future.
	That brings me neatly on to amendment 37, which is the sort of enlightened, progressive measure that people may have thought the Labour party would have championed in the past, but which they have long since given up hoping it will support in future. However, amendment 37 has been put forward by the progressive voice of British politics, which is me and the Liberal Democrats. It is a straightforward measure of the kind that would find favour with the right hon. Member for Birkenhead, who spoke about the need to cut taxes for people on low earnings, which is precisely what we seek to do.
	Amendment 37 would raise the personal allowance—the segment of one's income on which one pays no income tax at all—from the current figure of £6,475 in a financial year to £10,000. That would effectively implement a cut in income tax of £705 for anybody earning more than £10,000 a year, but it would also take out of tax altogether 4 million people whose income is above the current threshold but below £10,000. I do not pretend that amendment 37 is a cheap measure. It would cost billions of pounds to implement, which is why my party has identified a range of different ways of funding it. I could go into those at length, but as I talked about them in Committee, perhaps I will not detain the House today.
	Before I conclude, however, let me talk about the motive, which is the important feature. In supporting new clause 1 and tabling amendment 37, my party is trying to do two things. The first is to help people on low incomes to stand on their own feet and be less reliant on the state. We realise that everyone needs assistance, and that people on low incomes need it most, but it is perverse to take money away from people in taxes and then reimburse them through some complicated mechanism elsewhere in the system. Our desire is for people to have an incentive to work because they get to keep more of their income, and to be more self-reliant than they would otherwise have been. We feel that that goes with the grain of human nature and that it is good for people in those circumstances. In the present recessionary environment, it is particularly desirable for people to have greater incentives to work and for those at the bottom end of the income scale to be able to keep a bigger share of their earnings.

Peter Bone: Is there not a problem with the new proposal, in that it would not reimburse the people who lost out as a result of the abolition of the 10p tax rate, because it is not targeted in that way? The only way to reimburse those people is to reinstate the 10p tax rate. An advantage of the 10p rate was that people would go from paying no tax to paying 10p in the pound to paying 20p in the pound. The problem with this proposal is that they would go from paying no tax to paying 20p on the marginal rate.

Jeremy Browne: The hon. Gentleman is right to say that, under my proposal, people would go from paying no income tax at all to paying a marginal rate of 20p in one leap. However, he is wrong to say that the people who lost out as a result of the doubling of the 10p rate would still lose out under my proposal. That is because the threshold that I am suggesting is higher than the top of the threshold for the 10p rate would have been. Of course, there would be extra costs involved, because many other people would benefit from my proposal. I went through the funding implications at some length in Committee.
	The measure that I am proposing in amendment 37 is strongly compatible with new clause 1, and it has a similar objective. I said earlier that there were two aspects to our objective. The first is to incentivise people to work and to be self-reliant. The second is to create a fairer society. At the moment, many people on low incomes pay a very large proportion of their income in tax, partly because some of their consumer preferences are highly taxed. However, it is undesirable to levy income tax on people who are earning less than the minimum wage, only to try to reimburse them through an elaborate system of compensation. That is inefficient, and it reduces their ability to be self-reliant and their incentive to work. For all those reasons, we are keen to support new clause 1 and I urge hon. Members to support amendment 37.

Sally Keeble: I strongly support new clause 1 because it deals with an issue about which I have been concerned. I want to make some remarks about a particular group of people—namely, women between the ages of 60 and 64. I very much welcomed the introduction of the 10p starting rate of tax because it seemed an extremely progressive move. It represented a good stepping-stone on the way to paying the full rate of tax, and provided a welcome tax reduction for a large number of people on low incomes. It also seemed to provide a real incentive for people to go out to work, because they would not lose all their money to tax. Given that it was so successful, it is a great shame it was not retained as a proper part of the tax system.
	The decision to scrap the 10p rate did two things. First, it caused real practical difficulties, because people's tax went up. For people in a certain band, it doubled. Secondly, for the group of women I have mentioned, it produced a massive grievance. It is that second point that I want to deal with. The sense of grievance is as much a problem for them as the practical one of paying more tax, and it has persisted even though the Government have taken steps to deal with some of the practical issues.
	I had exactly the same experience as the hon. Member for Fareham (Mr. Hoban), in that women came to see me with letters telling them that their tax was going to double. In some cases, their husbands came to see me and said that their wives were worried because their tax was going to double. They asked me whether I could look into the matter. Those women had worked hard all their working lives, sometimes starting out paying the married women's stamp. They had brought up their children and they had done everything right. Their real grievance was that, having retired, they found that part of what they thought was going to be their retirement income was going to be eaten up by the extra tax.
	I recognise that single working people on low incomes also have a problem, but it is much harder for people on fixed incomes. People who have been retired for a while, or who are about to retire and are trying to plan for the rest of their lives, do not have so many options. It is hard for them to come out of retirement and go back to work. They do not have the same options for increasing their income. It is also harder now because work is harder to find. If people see that their family income is going to go down, they will try to increase their work by taking on extra shifts or doing something else to get the family income up to the level they need. However, that is obviously much harder for those who are retired and on a fixed income.
	A figure of 300,000 has been cited as the number of women in that position. I am sure that it would have been much higher, but women have had a real problem getting any substantial income in retirement at all. That has been well documented by Lord Turner and others. For women in this position, the problem is, in a sense, a result of their success. They have worked hard to make the necessary provisions and arrangements, and now find they are being hit precisely because they have been careful to ensure that they have an adequate income in their retirement, which is liable for income tax.
	I do not know whether the hon. Member for Fareham wrote to the Chancellor, but I did. I have to say that the consequences of my doing so were even worse than the problem I had in the first place. The letter that came back said, in terms, "Yes, we recognise that the tax will double. However, please tell your women pensioners that they don't have to worry, because their husbands will get an increased allowance." That is because their husbands are mostly older than they are, and they will get a higher personal tax allowance once they reach 65.
	That response intensified the sense of grievance. If there is one thing worse than telling a woman she is being discriminated against because she is a woman, it is telling her that everything will be all right because she will be able to depend on her husband to look after her in her old age. That was about the worst idea the Chancellor ever had. I cannot even remember whether I sent those letters out—I was so appalled at the idea of having to tell my women constituents that they were going to have to depend on their husbands in their retirement. That was not a sensible thing to say at all. Those women are very independent-minded. They have spent all their working lives working and providing for themselves and their families, and they often took life much more seriously than their husbands did.
	I fully recognise that real progress has been made on a practical front. I also strongly suspect that, while a lot of thought was given to tackling poverty, the impact of the abolition of the 10p rate on women pensioners simply was not properly thought through. The House has spent a long time arguing for the position of women pensioners. A number of women Labour Members have argued that the position of women pensioners must be properly respected and that some thought should be given to ensuring that proper arrangements are in place for women to have a reasonable income in their retirement. I suspect that the matter was not thought through too carefully. None the less, while some of the practical issues have been resolved for this group of women, the sense of grievance is still there.
	Although I have a great deal of sympathy with and am grateful to my right hon. Friend the Member for Birkenhead (Mr. Field) for introducing the new clause, I will not vote for it tonight. I wanted to raise this issue and discuss it because it has not been properly debated so far. Furthermore, I do not think that my constituents would thank me for the unforeseen difficulties that the Budget would face if the new clause were passed. We have to look at the practical side, as well as at the issue of what happens to women pensioners.
	I hope that Treasury Ministers will look again at this issue; we are talking about only a small group of people, although I wish it were bigger. Given how much women work and provide for their retirement, more of them should have a pension income sufficient to be liable for tax. It is only because of the position women have faced—earning part-time wages, lack of access to occupational pensions and difficulties in securing private pensions—that more of them are not in that category.

Peter Bone: The hon. Lady is making a sensible speech. I notice that her name appears on the amendment paper as a signatory to new clause 1, so is she really saying she is not going to support it?

Sally Keeble: No, which is exactly why I have explained my position on this amending provision and pressed Treasury Ministers on the issue of women. I have also explained why, if I am asked whether my constituents would thank me for causing the problems that would occur if the Budget did not go through, I do not think they would.  [Interruption.] No, it is not unbelievable. As the hon. Member for Wellingborough (Mr. Bone) knows perfectly well, Members frequently table probing amendments so that they can flag issues up and get them debated. Plenty of Members do that. I am standing here to explain why I signed up to the new clause and why I am going to vote in the way I have indicated.

Roger Godsiff: I have listened to what my hon. Friend has said. Will she explain what she thinks would happen if the new clause were accepted this evening?

Sally Keeble: I think we can hear about that from Ministers.

Roger Godsiff: I was going to ask them later.

Sally Keeble: I am very clear that if we start delaying the arrangements for tax and other payments, the consequences could well be problematic. If I asked my constituents whether they wanted the country run properly or not, I suspect that they would side with what I am doing.
	A number of Members, including my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones), have said that this is all about poverty. For some, that is absolutely true—it is about the poorest in our society—but the people who have lobbied me most on this issue, particularly the women in the age category I mentioned, suggest that it is not just about the depth of poverty. A number of those women were not in the poorest groups; they were on modest and reasonable incomes. I am thinking in particular of a woman whose door I knocked on some time ago. What grieved her most was that although she could afford to pay tax, she had worked really hard all her life and budgeted for a certain income in her retirement, yet suddenly saw it being hit. She will be hit because although the tax threshold has been raised, she has not been fully compensated.

Jeremy Browne: Will the hon. Lady write to that very constituent to tell her that she had an opportunity to right that wrong this evening but decided not to, or will she send her a copy of the new clause signed by herself and say that the constituent can be reassured that the issue was raised through her MP in the House of Commons?

Sally Keeble: I will be completely honest and send her a copy of what I have said, so she can see for herself. If she disagrees with my judgment, that is fine; it is her decision. The hon. Gentleman is completely wrong if he thinks that simply voting for the new clause and seeing it through would produce all the consequences he has talked about. There are ways of dealing with the problems of the group I am most concerned about—looking at differences in tax rates for income from pensions, for example—and other ways of ensuring that retired women pensioners on fixed incomes get the same tax advantages as their husbands, who might be older and also retired. We do not want this false position whereby women retire earlier, only to find that they are clobbered at a time when they cannot vary their earnings and are stuck with it.
	What most concerned my constituent was the fact that she was being discriminated against because she was a woman pensioner and had to pay an increased tax rate, even though she had retired at the proper age. I ask my right hon. Friends on the Treasury Bench to deal with that point. My right hon. Friend the Member for Birkenhead has spoken about the generality, and many Members have spoken about different groups in poverty. Will Ministers focus on women aged 60 to 64 who have retired, striven hard to provide a pension and made arrangements to secure a decent income, only to find that they are affected by the higher tax rate? As I have said, they have a profound and abiding sense of grievance at being hit by that tax increase in their retirement.

William Cash: It is said, "For whom the bell tolls"—well, there is no question but that the bell tolls for new Labour on this proposal. The Government have turned the values of new Labour and old Labour upside down by what they have done. To those who think that the vote by the Conservative party has an element of cynicism about it— [Interruption.] No, not at all. To those people I say that one of our greatest Prime Ministers, Disraeli, wrote a tale of two nations in the book "Sybil", which set out for its time the way in which Governments, as in our own time, create divisions in society by arrangements of this kind. The Government's proposals are totally unacceptable.
	Many people in our constituencies are deeply affected by those proposals. People in rural areas, for example, suffer from increasing poverty; dairy farmers in my constituency are similarly affected. Small businesses and individuals are going bankrupt under the burdens they are suffering under the present economic recession. It has been suggested today that the number of unemployed might be as many as 3.2 million next year. That is the reality of the direction in which the economy is going, as taken by this Government.
	While the Government bail out the bankers, the poor are battered by the proposals on the Government's agenda. There are broken promises, and it is down to Parliament to deal with them.
	The hon. Member for Stoke-on-Trent, Central (Mark Fisher) said that it was time to put Parliament first. Let me add to what he said: it is time to put people and Parliament first. That is what we must do, and that is what the proposal from our Conservative side of the debating Chamber must deliver tonight. The good and honest Members on the Labour Benches have evaluated the meaning of Labour for their own people, and we will do the same for our people. We have constituents who are equally poor and who need to be protected, and I believe profoundly that we have a duty to support them tonight.
	In an intervention earlier, I referred to the big landscape against the background of the actual figures of debt. The Government continually insist on a figure of £1 trillion, but according to the Office for National Statistics, and as I have said since 7 October last year—ably supported by other Conservative Members who insisted that the Government's figure was a complete fabrication—it is £3 trillion. The impact on the economy will be huge, and hence the impact on the very people whom we are trying to protect tonight will be all the greater, given bankruptcies, increased unemployment, greater rural poverty, and greater problems for the elderly. We must give help to those people, in conjunction with the help that can be provided by credit unions and the like, which I hope to encourage in my constituency. It is no good bailing out the banks when the people at the lower end of the scale will be worse off.
	It is essential that we vote tonight, and show the less well-off in our constituencies that we are prepared to protect them. The other day, my right hon. Friend the Leader of the Opposition talked about the potential for riots. When the scale of a problem presented by proposals such as this causes such a reaction among the people who will be affected, we can be in no doubt that there will be serious trouble by the middle of next year. It is therefore essential for us to introduce remedial measures to ensure that the poor are not affected by the Government's proposals.
	The landscape of the total debt figure is so huge, and the impact that it will have on the man in the street at the lower end of the income scale is such, that we must do all in our power to ensure that we protect people. By voting as we will this evening, we will guarantee that protection.

Kate Hoey: I support new clause 1, which bears my name. If my right hon. Friend the Member for Birkenhead (Mr. Field) presses his motion to a vote, I will support it, because I believe that this is our last opportunity to say clearly to the Government that what they did initially was wrong. We then thought that they had accepted that it was wrong, because they made some changes which we welcomed. However, 1.3 million people—according to figures from the Library and the Institute for Fiscal Studies, which I believe to be correct—are still waiting for help. If the new clause is not accepted tonight, there is no chance that anything will be done to help them before either the next Budget or the next general election.
	Given that we have a Treasury team and many civil servants and highly paid officials and consultants working on Treasury matters, it is sad that during the period between the previous changes and the current Budget, they could not come up with a solution to compensate 1.3 million people for their loss. Admittedly that number is very small as a proportion of the overall population, but it nevertheless represents some—although not all, as my right hon. Friend said—of the poorest paid people in the country. We would have loved to table an amendment or new clause tonight that did come up with a solution, but the nature of debates such as this makes that impossible.
	Notices have been delivered, and the Government Whips have told us how terrible it would be if the new clause happened to be passed. I find that strange. We have been told that the new clause is dangerous: that it would restrict the Government from collecting any income tax for 2009-10, with an estimated cost of £140 billion. We have been told that the services on which the public depend will be put at risk. Do we really believe that if this measure were passed, the Government could not go off and do what they did when the banks were collapsing? The Chancellor was up all night—all weekend—sorting things out and finding a solution. Are we really saying that that could not be done if this measure were passed this evening?

Stewart Hosie: There was such a situation in the United Kingdom earlier this year, when a budget was not passed in the Scottish Parliament. The Opposition worked out quickly what needed to be done, and a week later the budget was passed unanimously with, I believe, one exception. Of course action can be taken to cause a budget to be passed in exactly the way in which the hon. Lady has described.

Kate Hoey: The hon. Gentleman is right. The problem is that whenever we say that we want something to be changed and we know that that is the right thing to do, a reason is given for it not to be done which makes many of those who have supported the measure in question change their minds and decide not to vote for it. They can all examine their consciences, and it is perfectly right for them to do so.

George Howarth: I accept that the position could possibly be put right within 24 hours, but will my hon. Friend accept just for one moment that, if the Government are right, within those 24 hours an enormous amount of damage could be done to the economy and, consequently, an inordinate amount of damage could be done to the very people whom she and I seek to protect?

Kate Hoey: I am not an economist, and I am sometimes quite glad that I am not, but I see things in a common-sense way. I find it incredible that we should not pass a measure asking the Government to find a solution to the problems of the 1.3 million people who have been so badly hit. The Government have had months and months in which to sort those problems out. It is not up to the official Opposition, the Liberal Democrats, the Scottish National party or my right hon. Friend the Member for Birkenhead to come up with a solution. The Government could have come up with a solution, but they chose not to. They thought that the problem had gone away, but the fact that we are not all still receiving hundreds of letters about the issue does not mean that it has gone away. Most of my constituents who have suffered have almost given up, believing that the Government will not listen.
	A woman wrote to me saying:
	"I am 58, female, single and childless. I am currently on a low income and, sadly, may remain in this situation—employment possibilities for people of my age being what they are... I do not wish to be well-off but aspire to living independently and with dignity, which will mean continuing to earn whatever I can for as long as I possibly can. Believing in personal responsibility, I have managed to save some money to provide a meagre supplement to what will be an insufficient pension... I am one of those who will fall foul of this iniquitous new measure"
	on the 10 per cent. tax band.
	"I cannot believe that this has been brought in by a Labour government and particularly by our current PM. For the whole of my life I have voted Labour... I am so astonished at this measure ... I cannot express strongly enough my outrage towards my Labour government that such an attack should be made on low earners like me, young or old."
	I have received a number of similar letters, and I am sure that all Members were being visited by their constituents months ago. However, people have become fed up with going on and on about the issue, because they feel that the Government are not listening. Tonight's debate gives us all an opportunity to say that the problem must be solved, and could be solved.
	I hope that if my right hon. Friend the Member for Birkenhead presses his motion to a Division and the new clause is accepted, the Government will sit up all night and, indeed, for the next 24 hours. We have until 5 August in any event, and there is no huge impetus for the problem to be solved in the next 24 hours, but it could be none the less. Let us sort the problem out. Let us show that we realise that the poorest people in our country are being hit and that that was a mistake, or, if not a mistake, the wrong decision. Let us show that we want to change it—and the only time when we can change it is tonight.

David Drew: I can say little more than my right hon. Friend the Member for Birkenhead (Mr. Field) or my hon. Friend the Member for Vauxhall (Kate Hoey). I rise with considerable sadness and with a quizzical outlook. I want to hear some answers from Treasury Ministers to some fairly obvious questions. Two and a half years ago, the 2p reduction was made to the basic rate, and the 10p rate was removed as a means of funding that.
	I do not understand why it is so difficult to track down the real losers. If there are 1.3 million losers, I would have thought that the finest minds in the Treasury working night and day would have been able to identify who they were and what the impact on them has been. What numbers have been crunched and what decisions have been made to try to do what the Government set out to do when they realised their mistake? Why did they not go further on earlier occasions to deal with a running sore, something from which we cannot hide? We have made some of the poorest people poorer. That is unacceptable, but it is something that we can rectify even at this late stage.
	I intervened on the hon. Member for Fareham (Mr. Hoban) to say that if only we had spent more hours dealing with tax avoidance and fewer hours making the poorest poorer, some Labour Members would feel that our time here had been well spent. Even at this late stage Ministers must realise that they must do something. They face the possibility of a large rebellion tonight; that has been coming for the last two and a half years. There have been various skirmishes but tonight it is for real. It is a question of poverty and of trying to make the case for those who have been made worse off by a change that was not thought through.
	At the time some of us thought that it was a pure gimmick. There was a debate to be had about whether the 10p rate was the most appropriate way to try to help the very poorest in our society. Part of the problem that I have is that we do not know who these 1.3 million people are. They are not a group; they are individuals—I will not go into the question of there being no such thing as society. However, this is not one homogenous group. There is a need for measures to deal with these different people even at this late stage. I am looking for Ministers to come clean on this. What measures have they explored to try to help those who have been hit? Those people have written to all of us, which makes it so much more difficult. We cannot say it is those who are 16 to 18, or 18 to 21, or single pensioners—women largely—aged from 60 to 65. Many of those are in that group but they are not the totality. There are others. My hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) mentioned couples with no children who are in this group and feel particularly hard done by because they have struggled to stay in work and to earn a decent living. They saw the 10p rate as a good way of rewarding them.

Diane Abbott: Does my hon. Friend agree that there has been some talk in the past 48 hours that if this new clause is passed tonight, the following morning the Government will not be able to collect taxes, the markets will crash and government will grind to a halt? Does he not agree that these are tales to frighten children and that people should decide to vote tonight on the merits of the arguments and not on implicit threats from Treasury Ministers?

David Drew: I always think it is better to win the debate through argument than through other ways—for example, people instructing us it is better to vote one way rather than another. I am looking to Ministers to go through the arguments presented by my right hon. Friend the Member for Birkenhead and to say that the situation is not as he described it. So far that has not happened. There has not been a willingness to engage and to find an alternative way we could take this forward, other than some of the measures introduced in both the pre-Budget report and the previous Budget.
	We are at a difficult stage now. We need to recognise that the hurt among core Labour supporters remains. Some of us will find it very difficult not to want to go back to where we were, which was to recognise that these are the people whom we cannot afford to be made worse off. That is what Ministers need to do and that is what I look to my right hon. Friend the Financial Secretary to do now.

Stephen Timms: We have had a very good debate. At Budget 2007, the Government announced the abolition of the 10p rate and changes to personal tax and tax credits. Most households were compensated by other parts of the package, but my right hon. Friend the Member for Birkenhead (Mr. Field) and others argued forcefully and successfully that more needed to be done. The Government accepted that and on 13 May last year my right hon. Friend the Chancellor announced an increase in the personal allowance. Most people began to benefit from that from last September by a total of £2.7 billion. Some 22 million people on low and middle incomes saw their tax reduced by £120 in 2008-09 and 4.2 million of the original 5.3 million households who lost out from the abolition of the 10p rate received as much or more than they originally lost, but not higher rate taxpayers. I was glad that the hon. Member for Taunton (Mr. Browne) intervened to make that point.
	On Report of last year's Finance Bill, which made the changes that were announced, my predecessor, my right hon. Friend the Member for Liverpool, Wavertree (Jane Kennedy), was asked by our right hon. Friend the Member for Birkenhead and others about further commitments. She argued that we had substantially reduced the number of losing households but she acknowledged that there were still, at that time, just over 1 million households losing out, and that we needed to do more to help. The hon. Member for Fareham (Mr. Hoban) suggested that we then did nothing. That is simply untrue.
	In the PBR, the Government announced further support. We rolled forward the increase to the personal allowance announced in May, increasing it by a further £130 above inflation. Those changes now fully compensate over 90 per cent. of the 5.3 million households who would otherwise have been paying more, reducing the number to around 500,000 households in 2011-12. The maximum individual loss is now £92 a year, or £1.77 per week, if there is no offsetting tax credit gain. The average loss for a household is now less than £1 a week. I agree with those who have said that even a loss of that size is significant for some of the people we are talking about, but it is important to make it clear that we are not talking about average losses of £2 or £3 as has been suggested.  [ Interruption. ] May I make some progress because I know that the House is anxious to conclude the debate?
	It is not the case that all these losing households are low-income households. Relatively few are in the lowest income decile, because many in that group do not pay income tax, and we have taken an additional 800,000 people out of income tax altogether through the steps we have taken. Of the 500,000 households that remain, some 100,000 are in the highest income decile. For example, if a household comprises a City banker and a second earner who lost out from the abolition of the 10p rate, that household is included in the 500,000. There are 100,000 of the 500,000 in that category. The new clause would prevent the Government from collecting any income tax until well-off households like that were made even better off. I cannot believe that that is the intention, but that would be the effect of the new clause. At the 2008 PBR, we acknowledged that, although the number of losing households had been reduced by 90 per cent., there would still be some who lost out. Although public concern has not been completely eradicated, it has certainly been substantially allayed by the changes we have made.
	There has been some discussion of the impact of the new clause, and I want to comment on that. Income tax is an annual tax that needs to confirmed annually in each Finance Bill. If the new clause were carried, without some rather desperate measures we would be unable to collect income tax this year, and income tax already collected would have to be repaid. The chaos does not bear thinking about.
	Let me comment on the position of the Conservative party. The Conservatives did not object to the abolition of the 10p rate, and the 10p rate has not been mentioned in any Conservative amendment to the Bill. They have not previously supported amendments on this topic moved by my right hon. Friend the Member for Birkenhead—presumably, in the past, because of concerns in respect of fiscal responsibility. They have not today suggested any mechanism for compensating losing households, despite my giving the hon. Member for Fareham the opportunity to do so. Yet now they are set to abandon fiscal responsibility and follow their leader, who signed the amendment, through the Division Lobby to block the collection of income tax. Lest anyone thought the Conservative Opposition were fit to form a Government, their disgraceful position today shows that they are not.

Several hon. Members: rose —

Stephen Timms: I want to make a little progress for now, and say the following to my right hon. Friend the Member for Birkenhead, for whom I have great respect. I agree with my hon. Friend the Member for Stoke-on-Trent, Central (Mark Fisher) that my right hon. Friend and those who have worked with him have achieved a very substantial amount through their pursuit of this matter over the past couple of years. The terms of this new clause are, however, impossible for the Government to comply with. We could only do so by announcing large sums of extra spending—£2.6 billion this year if this was to be done by increasing the personal allowance further—and the imperative of fiscal consolidation rules that out. Alternatively, we could come up with some very complex means-testing arrangement, which would reduce the cost somewhat but also introduce unmanageable new processes. With the best will in the world, that would take a considerable period of time, and in the meantime we would be unable to collect income tax.
	That is not to say that there is nothing we can do. I and my colleagues would be very happy to discuss any ideas my right hon. Friend or others might want us to consider before the pre-Budget report, and to see if we can help further. My hon. Friend the Member for Northampton, North (Ms Keeble) and others highlighted concerns about women who retired at 60 after a lifetime of work and who will now pay more tax than they had expected until the age of 65, and there are also other concerns about the particular circumstances that some people face. We will be happy to look at those, too.

Sally Keeble: Will my right hon. Friend not only look at the practical consequences to do with the money these women have lost and the fact that that comes out of pension income and not earned income, but address these women's real sense of grievance that they were discriminated against and told, "Not to worry, dear; your husband's got a higher tax allowance"?

Stephen Timms: Absolutely—and that should certainly not have been said to anybody. There is a sense of grievance, although it is substantially allayed by the changes we have made. I will certainly be happy to look at those points over the next few months, however.

Roger Godsiff: Will the Financial Secretary briefly explain what would happen if new clause 1 were carried this evening? Is he saying that if it were carried, the Government's tax-raising powers would end?

Stephen Timms: Well, the power to collect income tax ahead of Royal Assent is founded on the Provisional Collection of Taxes Act 1968, section 1 of which provides that a resolution under the Act has statutory effect for a specified period. One of the things that brings that specified period to an end is rejection of the provisions of the Bill reflected in the resolution, so we would not have until 5 August to carry on collecting income tax. As I have said, there would have to be some rather novel legislative interventions rather quickly.

David Taylor: I moved a not dissimilar measure in the equivalent debate in July 2008, and I offered a formula to the Minister at the time. I did not press it to a Division because I was assured that strenuous efforts would be made to remedy the remaining problems. There appear to be 500,000 families and an average of £50 each, which amounts to £25 million. Can the finest minds in the Treasury not fashion a method of compensating for that £25 million that does not involve a factor of hundreds of millions of pounds in excess? I cannot believe that that can be true.

Stephen Timms: Actually, it is true, and we have taken strenuous measures. I think my hon. Friend is suggesting some very complicated means-testing system that would require, for example, a very large number of people to fill in self-assessment forms who do not currently have to do so, and who would not know until the end of the year what their income tax was. I want to underline the fact that I am very happy to look at suggestions that Members and others may want to raise between now and the PBR. Blocking income tax is not the answer, however, and I ask my right hon. Friend the Member for Birkenhead to withdraw the new clause.
	The hon. Member for Taunton described amendment 37 as progressive. He also had the good grace to acknowledge that it would cost a fair amount of money: £18.5 billion actually, so it is completely unaffordable. I do not think the House will be attracted to it, despite the oratory that he employed to urge his move upon us.
	Amendment 40 provides for the adjustments that have to be made between settlors and trustees of a trust. It seeks to set out a mechanism for payment of tax by settlors, and addresses settlor-interested trusts and certain trust income of children that is treated as income of the settlor of the trust. I say to the hon. Member for Fareham that these changes are not necessary, however, as what they seek to achieve is already allowed by the rules. If he needs me to provide any further detail on that, I will be very happy to do so.
	New clause 1 and amendment 37 challenge the Government's response to helping families now and to compensating those who lost out from the abolition of the 10p income tax rate. I pay tribute to my right hon. Friend for leading a lengthy campaign on this issue, which has been effective and successful. He was right to raise it, and he has brought about significant changes. My case is that our response has been fair, straightforward and effective, and that it substantially deals with the concern raised. I understand that there are continuing concerns, and we are happy to continue to look at them, but halting the collection of income tax is not the answer.

Frank Field: There is clearly something wrong with our procedures when Members who wish to reform a Budget constructively have to resort to tabling a new clause that, according to my right hon. Friend, will blow the House and everything else asunder if we press it to a vote. It is very significant, however, that he did not say in response to the intervention of my hon. Friend the Member for Birmingham, Sparkbrook and Small Heath (Mr. Godsiff) what would happen if we passed the new clause. We all know perfectly well that we are not rejecting the Budget. We are not rejecting these powers; we are putting a temporary hold on them. Let us suppose, however, that my right hon. Friend is right about the outcome. We know perfectly well what any rational, sensible Government with a real wish to live would do. They would immediately come back and say that they would have a vote of confidence now and insist that it is passed, and one would hope that, with a little humility, they might come back with the measures we are all asking for.
	This debate has been quite a simple one, although it has taken a long time. When I opened it, I said that although there were different views among those on this side of the House—those of old Labour, new Labour and just Labour—the great golden thread that linked us all and sent us here in public life was the desire to protect the poorest. We might have disagreed about everything else, but that was sacred to us. This 10p measure that the Government introduced has tried to break that golden thread.
	Of course, the Government have taken some measures, but they have not taken a single measure that specifically helped those who lost out by the abolition of the 10p rate. The Government have taken other measures that have benefited taxpayers generally, including those who were losers from the abolition of the 10p rate, but they have taken no specific tax measure to compensate that group. Tonight is our last opportunity to say to the Government that they need to renew their faith and our faith in the tradition that sent us here, so that when we go into that general election—

Lynne Jones: I am trying to decide how to vote should my right hon. Friend press this matter to a Division. The only practical way of dealing with this situation is by a general increase in the threshold above which people pay tax—that would, however, also help other people—because targeting those losers specifically would be enormously complex, and I am not in favour of such complexity. In such an approach, the money could then be clawed back at the higher level. Is that what he is proposing? We need to have a practical measure to deal with this problem that will not cost billions.

Frank Field: I am grateful for that intervention, because it allows me to point out that the Minister keeps saying that the Government are open to suggestions, but we have been making suggestions ever since they got us into this mess by abolishing the 10p rate. The most obvious way to bring justice without having to eat humble pie and reintroduce the 10p rate would be to raise tax allowances by the amount that made sure that there were no losers earning less than £18,000 and claw back that increase from the rest of us by adjusting national insurance. Such a measure would be targeted and effective, and it could be done this year. The trouble is that when such suggestions are made, they are not ones that the Government favour and so they reject them. That is fair enough, but they cannot then keep saying that they are open to suggestions.

George Howarth: I suspect that my right hon. Friend is correct about the proposal that my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) just made. Why then did he not table it as his new clause?

Frank Field: As I have been explaining, I cannot do that. The House of Commons has this absurd procedure whereby either we let things through or we table proposals such as this just to hold the Government back for a moment, so that they have to think again. We are then accused of trying to press the nuclear button. The constructive thing that we cannot do in Budget debates is propose how the Government might get out of the big hole that they have dug and fallen into. As we now have a reforming Speaker, I hope that that is one of the areas in which we will bring about change, but that is for the future. Today's debate is about whether we demand additional measures to help those who earn the smallest wage packets in our country; it is about whether we rectify the attack that the abolition of the 10p rate made on their standard of living. The Minister has mustered all his skill from the Front Bench. He has given us reassurance, but he has not given us any actual proposals. As a result, I shall press new clause 1 to a Division.

Question put, That the clause be read a Second time.
	 The House divided: Ayes 268, Noes 311.

Question accordingly negatived.

New Clause 3
	 — 
	Office of Tax Simplification

'(1) The Treasury shall establish an Office of Tax Simplification.
	(2) Its mandate shall be to—
	(a) review tax law
	(b) make proposals on tax law reform and simplification.
	(3) Regulations shall specify the governance arrangements of the Office of Tax Simplification.
	(4) Regulations made under this section may not be made unless they have been laid before, and approved by a resolution of, the House of Commons.'.— (Mr. Gauke.)
	 Brought up, and read the First time.

David Gauke: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: new clause 4 — Holiday accommodation report
	'(1) The Chancellor of the Exchequer shall, before the publication of the 2009 Pre-Budget Report, have compiled and laid before the House of Commons a report containing an assessment of the impact of—
	(a) section 503 of ICTA, and
	(b) Chapter 6 of Part 3 of ITTOIA 2005,
	on the liability to tax of commercially let furnished holiday accommodation.
	(2) Any such report shall address the impact on the UK tourism industry.
	(3) A Minister of the Crown must, not later than one month after the report has been laid before the House of Commons, make a motion in that House in relation to the report.'.
	New clause 6— Competitiveness of the tax system
	'Prior to the first reading of a Finance Bill, the Treasury will lay before Parliament a report on the impact on the competitiveness of UK economy of—
	(a) the measures set out in that Finance Bill,
	(b) the rates of—
	(i) corporation tax,
	(ii) income tax,
	(iii) national insurance,
	(iv) capital gains tax,
	(v) excise duties, and
	(vi) vehicle excise duties,
	(c) the complexity of the tax system, and
	(d) the relationship between the HMRC and the taxpayer.'.
	Amendment 36, in clause 8, page 3, line 31, at end insert—
	'(2A) At the end of subsection 13(3) of ICTA 1988 (small companies' relief), insert—
	"(3A) Where in any accounting period the profits of a company do not exceed 1/12 of the lower relevant maximum amount, the company may claim a further reduction (to be known as the "very small companies' relief") on the amount of corporation tax payable under this section.
	(3B) The Chancellor of the Exchequer shall, by regulations and within three months of Royal Assent, prescribe the level of the very small companies' relief.
	(3C) Regulations made under subsection (3B) may not be made unless a draft of the statutory instrument containing the regulations has been laid before, and approved by a resolution of, each House of parliament."'.

David Gauke: We now turn to another crucial subject, although I do not know whether it will hold Members in the Chamber for long. New clause 3 and the others in the group deal with tax competitiveness— [ Interruption. ]

Mr. Deputy Speaker: Order. We have important business to continue with. Will Members please leave the Chamber quickly and quietly?

David Gauke: New clauses 3 and 6 specifically address and seek to improve the competitiveness and attractiveness of the UK taxation system. I hope that there is consensus in the House that it is important that the UK has a competitive taxation system. I hope that that is not in any way controversial, although it is perhaps worth reminding the House of the words of the right hon. Member for North Tyneside (Mr. Byers) on 27 April:
	"The United Kingdom needs a tax regime that is not only fair, but internationally competitive and attractive."
	He made that point in the context of a debate on the Budget and, in particular, the proposal about the 50p higher rate income tax. He said that
	"the measures in the Budget will make the United Kingdom less attractive."
	I am arguing for a competitive taxation system in the United Kingdom, and some would criticise that approach by attempting to suggest that it is somehow unfair or inherently against the arguments for social justice. Again, it is worth quoting the remarks of the right hon. Member for North Tyneside, who stated that
	"wealth creation and social justice are two sides of the same coin. We need wealth to be created if we are to provide the money to finance our social programmes." —[ Official Report, 27 April 2009; Vol. 491, c. 616.]
	It is in that context that we have tabled new clause 3 and new clause 6. It is important that the UK has a competitive tax system but the concerns about it are becoming stronger.

Jeremy Browne: Does the hon. Gentleman share the concern held by me and the right hon. Member for Witney (Mr. Cameron) that there are far too many quangos in Britain and that the cost is prohibitive? Does he worry that this extra quango is a step in the wrong direction?

David Gauke: I am grateful to the hon. Gentleman. I shall turn in detail to the office of tax simplification, but I have to say that his intervention was as predictable as it was, perhaps, wrong-headed. Had he read the excellent speech that my right hon. Friend the Leader of the Opposition made yesterday, he would have seen that it set out the reasons why it is necessary and desirable to have some organisations that bring technical expertise to an area or provide a degree of transparency as to how matters are dealt with. Such matters are better dealt with outside government rather than inside government. I will make the case that the office of tax simplification meets all those criteria.

David Taylor: Is there not a flaw—perhaps two—in what the hon. Gentleman is saying? Competitive taxation is one of the concerns that are way down the list of those who are considering where to locate themselves as employees or the businesses that they may own or operate. Is it not the case that we must have a competitive corporate tax rate? How many countries would have the majority of their 100 largest companies, as we have in FTSE, paying no mainstream corporation tax? That suggests that we have a very competitive tax rate and tax regime, does it not?

David Gauke: I think I know where the hon. Gentleman got that statistic from, and I am not sure that it is actually right. Perhaps the Minister could respond to that point. That example is often quoted, but my understanding is that it is not necessarily the case. It is right that we should have a competitive taxation system, and I am very pleased that the hon. Gentleman supports that objective. However, the concerns about whether our tax system is competitive are very strong. For example, let me quote the CBI report that was published last year. It says:
	"The competitiveness of British business is increasingly compromised by the UK corporate tax system. Only a few years ago the UK was perceived to be one of the most competitive places in the world to do business, underpinned by one of the most competitive corporate tax systems. Today this advantage has been significantly eroded."
	Richard Lambert, chief executive of the CBI, has also described our tax system as a
	"ball and chain round the ankle"
	of the UK economy.
	I could even quote the former head of the Prime Minister's business council, who warned the Government to be "extremely careful" on tax policy. It is pretty clear what he meant when he stated:
	"The consistency and the nature of (the tax policy) has been hugely attractive to overseas people and to companies. We mustn't lose that competitiveness. It would be very bad for the UK (and) it would be hugely damaging for business."
	That head of the Prime Minister's business council is now Lord Davies of Abersoch, the Government's Trade Minister.
	A KPMG survey of 50 of Britain's largest businesses published in January 2009 revealed that the percentage actively considering moving their tax residence out of the United Kingdom jumped from 6 per cent. in 2007 to 14 per cent. in 2008. In fact, one of those businesses had already left the UK by 2008 so perhaps we should say 16 per cent. We have seen a number of companies relocate their tax residence out of the UK—WPP Group, Shire, and United Business Media, to name but three. Those cases were specifically to do with fear of the regime on the taxation of foreign profits.
	It would be fair to say that since the KPMG survey the Government have come forward with proposals that we debated at some length in Committee, and there is some support for those proposals. We raised a number of concerns and, despite the support for the proposals, the concerns remain. KPMG went back to those companies that were actively considering moving their tax residence after the Government had proposed their reforms on the taxation of foreign profits and the fact remained that all but one of them were continuing to consider actively moving their tax residence. One was waiting to see how things developed. It remains a problem, notwithstanding the announcements that the Government have made on the taxation of foreign profits.
	It is worth highlighting the World Economic Forum survey on global competitiveness, which addresses a number of issues including tax competitiveness, where the UK's position fell from fourth in 1998 to 15th in 2003. New clause 6 addresses a number of aspects of competitiveness, one of which is rates. Corporation tax rates have not risen but have, in relative terms, become less competitive. Our corporation tax was the third lowest in the EU15 in 1997 and the sixth highest last year. We have a higher rate than the OECD average, which was not the case in 1997. We can consider the rate of income tax. Of course, at the higher rate level of 50p, we will now have one of the highest rates of income tax in the world, not one of the lowest.
	There is also the issue of tax complexity. Those who debate such matters will be familiar with the fact that the UK now has the longest tax code in the world and that we have overtaken India in that respect. It is common in such debates to quote the exponential increase in the number of pages involved in tax textbooks. These are real problems that are frequently highlighted by professional organisations and business groups. I shall touch on that point again in a moment or so.
	There is also a lack of predictability that has affected the UK tax system, particularly in the past few years. In a run of Budgets and pre-Budget reports, announcements have been made that were not consulted on and poorly drafted legislation has been presented that has caused significant concern to business groups in the UK. The capital gains tax proposals in the 2007 PBR and the proposals on residence and domicile in last year's Finance Bill are examples of that.
	How do we address these fairly fundamental concerns? New clause 6 would require the Treasury to lay before Parliament an annual report on the impact on the competitiveness of the UK economy of measures in that year's Finance Bill. It would also require tax rates, the complexity of the tax system and the relationship between HMRC and the taxpayer to be taken into consideration. The advantage is that that would force the Treasury to focus on the issue of tax competitiveness, and enable Parliament to assess the Treasury's performance in that area. It would also send a strong signal to international investors and businesses about the importance that we as an institution attach to tax competitiveness. The proposal regarding the relationship between HMRC and the taxpayer would also be important in that regard, as it would mean that we all focused on ensuring that Revenue and Customs provided a service to taxpayers that worked to the UK's advantage.
	New clause 3 focuses more specifically on the proposal to establish an office of tax simplification. It is an attempt to address the problem of tax complexity, but it would also help with tax predictability. The OTS recommendation is one of three in the report published last year by Lord Howe, the second being a proposal to establish a Joint Select Committee on taxation that would make use of the expertise in this House and the other place to scrutinise Finance Bills and draft legislation. The third element of the Howe report is a proposal for a new convention to the effect that any change to the law with a technical content should be set out no later than the PBR before a Finance Bill is introduced.
	The OTS would also report to the proposed Joint Select Committee on taxation, very much as the National Audit Office reports to the Public Accounts Committee. The Howe report proposes that the OTS would be overseen by a steering committee appointed by the Chancellor. Its staff, in some respects like that of the tax law rewrite project, would be made up of a combination of people from HMRC, academics and representatives from the professional organisations and major firms, perhaps on secondment for a year or two.
	The OTS's role would be to examine such areas of fiscal law as seem to it appropriate and to put forward proposals for tax law. It would not express a position on rates or yield or make decisions on tax law—it is absolutely right that this House does that—but it would make recommendations.

Jeremy Browne: I hope that I have not missed this in the hon. Gentleman's speech, but will he say what salary he would expect the head of the OTS to receive? Would that person work full time, or for only a few days a week?

David Gauke: We have not made a decision about salary, and the hon. Gentleman would not expect us to have done so at this stage, but as I shall make clear in a moment, we believe that it would be an important role that would add considerably to the effectiveness and attractiveness of the UK tax system.
	It might be worth making some comparisons with other organisations. I have referred already to the NAO, for whose work there is great respect across the House. The way that the NAO reports to the PAC is an example of the House of Commons working very effectively, and similarly Lord Howe proposes that the OTS would report to a further parliamentary Committee. Another comparison can be made with the tax law rewrite project which, as its name suggests, is an attempt to rewrite tax law in a way that is more accessible. We have debated it from time to time—I have debated it with the Financial Secretary—and there is widespread recognition of the professionalism with which the project has been undertaken. The OTS proposal is more ambitious and would require a different type of people but, like the tax law rewrite project, its staff would be made up of a combination of HMRC people, academics and professionals.
	Another comparison could be drawn with the Law Commission, which plays a very useful role in making recommendations in technical areas and improving the quality of law as a whole. Indeed, it is worth pointing out that the Chartered Institute of Taxation has called for a long time for the establishment of a tax law commission, a body very similar to the OTS. Lord Howe did not go for that name but he could have done, as the commission would perform a similar role.
	Setting up the OTS would have a number of advantages, the first and foremost of which is that it would be a force for making tax law simpler and less complex. An inevitable pressure is exerted by some Chancellors—let me put it that way—to complicate matters, to meddle and to tweak. I think that we can all think of a Chancellor or two who would fall into that category, but the proposed OTS would be a force against that.
	The second advantage is that the OTS, in conjunction with the proposed Joint Select Committee, would involve more informed parliamentary scrutiny. Members of this House have to tackle highly technical matters, and the OTS would provide them with more information. It would also require a more deliberative process for making tax law: added to the work of the OTS, Lord Howe's recommendation for a convention that technical matters are published in the PBR would mean that the process was more thorough. That would also provide greater predictability in our tax system, because likely reforms would be clearer at an earlier stage.
	The next argument for the OTS is that it would allow the expertise that exists outside the HMRC and the Treasury to play a greater role. I do not mean to belittle the work that those bodies do, but there is an enormous amount of expertise in the professional organisations. Having served on the Committee of each of the last four Finance Bills, I am not convinced that the system gets the best out of that expertise. The proposal would involve more consultation and a greater opportunity for the input of that expertise at an earlier stage in the process, before it becomes a matter of Government climbdowns or political embarrassment for amendments to be accepted.
	A related benefit would be a lowering of the barriers between HMRC and the professionals so that the system made it easier for people to spend time working for HMRC, time in private practice, then back to HMRC and so on. Closer co-operation between HMRC staff and those working for the major accounting firms would be welcomed.
	The Howe report points in the direction of an improved method of making tax law, and consequently in the direction of improved tax law. At a time when there will be substantial pressures on the public purse and no scope for substantial tax cuts, to put it mildly, and at a time when the rhetoric that we hear from the Government about continuing investment suggests that there will be no cuts in public spending, as we sometimes hear from the Prime Minister, we will see substantial increases in taxes. If that is the case, the least we can do in the context of tax competitiveness is improve the way tax law is made. It is right that we as a party have taken that extremely seriously. We are grateful to Lord Howe for the efforts that he put into producing his report last year. We think the two new clauses are extremely valuable.

Rob Marris: Can the hon. Gentleman say a little more about the philosophical underpinnings of tax simplification? It is all very well talking about getting rid of complexities through simplifications. When one does so, one gets rid of subtleties and discretion, so one is likely to end up with a system more akin to rough justice. Because of the complexities of people's lives, particularly their tax lives, there is likely to be a backlash against that, as we have seen tonight on the 10p issue, which was supposedly designed to get rid of complexities.

David Gauke: The hon. Gentleman makes a good point in the context of the 10p rate. I fear that there are times when the argument for tax simplification has been damaged by that measure and the reforms to capital gains tax. If I were in a more partisan mood, which I rarely am with the hon. Gentleman, I would say that when the Government talk about tax simplification, the taxpayer should count the spoons. I recognise the hon. Gentleman's point, and I recognise that simplicity in the tax system is one, but not the only, objective of an effective tax system. It is not the only thing that matters.
	We have a real problem. The point is made by professional groups time and again, and it is one of the reasons why our proposals on the office of tax simplification have been so warmly welcomed by the Institute of Chartered Accountants, the Chartered Institute of Taxation, the Association of Chartered Certified Accountants, the CBI, the British Chambers of Commerce and the Institute of Directors. There is widespread support for the proposals because the balance has not been struck in the past few years.

Brian Binley: I am listening to my hon. Friend's comments with great interest and welcome the proposal. Does he recognise that for many small businesses, the whole complicated tax system falls proportionally much more heavily on them than on many larger businesses? Does he recognise that the simplification will be a great aid to many small and medium-sized enterprises that are struggling to survive, let alone progress and make massive profits?

David Gauke: Indeed. My hon. Friend is a strong and eloquent advocate of the interests of small businesses and I am grateful for his intervention. He is right that small businesses have greater difficulties with complexity when they cannot afford the infrastructure of tax advice. Small businesses also suffer most from difficulties with administration of the tax system. By and large, I tend to find that the smaller the business, the more concerns they have about the way in which HMRC works. Larger businesses tend to have more positive views about the way in which HMRC works with them than do smaller businesses.

Rob Marris: Drawing together his response to my intervention and to that from the hon. Member for Northampton, South (Mr. Binley), do I take it that if it were pressed to a vote, the hon. Member for South-West Hertfordshire (Mr. Gauke) would vote against amendment 36, a tax measure proposed by the Liberal Democrats which would favour very small companies, but would lead to greater complexity in the tax system?

David Gauke: We look forward to hearing the arguments made in favour of that amendment by the hon. Member for Taunton (Mr. Browne). My concerns about it are more to do with affordability than complexity. There are better examples of complexity in the system that need to be addressed than whether or not there is an additional rate.
	New clause 4 returns to a debate held at the very end of the Committee stage as a consequence of a new clause tabled by the hon. Member for Taunton. It was always our intention to raise this in the Committee of the whole House because it affects a number of constituencies. It relates to the taxation of furnished holiday lettings. Let me put that briefly in context. Until the late 1970s the provision of holiday accommodation was regarded rather informally by the Inland Revenue as a business activity for tax purposes. Consequently, there was favourable income tax and capital gains tax treatment of it.
	The Inland Revenue changed this practice in the early 1980s and started to treat the activity as an investment, rather than a business. There was considerable disquiet, and in 1984 furnished holiday lettings were formally treated as a business activity for tax purposes. This year the beneficial treatment of furnished holiday lettings is being extended to properties in the European economic area, but it was announced in the Red Book that the Government intend to abolish the furnished holiday letting rules next year and owners will need to prove that they are running a trade in order for it to be treated as a business activity. We had only a brief opportunity to debate the matter in Committee, and I thought it might be helpful to return to it and perhaps press the Minister, who made some helpful and conciliatory remarks in the Committee of the whole House. I should like to take this opportunity to press him again.
	The concern expressed to us is that a number of properties that are currently let out as furnished holiday lettings will be sold before April 2010 to benefit from the advantageous capital gains tax regime. Some may think that there are advantages in doing so, given that such properties tend to be located in attractive rural parts of the country where locals often find it difficult to secure affordable housing. However, we are hearing that many of those homes are likely to be sold to second-home owners, who will use the cottages only occasionally. As a consequence, the properties will not be in use as often; there will be fewer visitors to the countryside; and there is the potential for significant damage to the rural economy. The situation will become more difficult for those currently owning furnished holiday lettings and for holidaymakers wanting to rent out a holiday home in the UK. In rural areas that are popular with tourists, there is particular concern that the measure will have a major impact on their economy. I note that there is particular concern in Devon and Cornwall, where there are some 62,000 furnished holiday lets. They could be substantially affected.
	The hon. Member for Taunton raised one point about which I, too, have heard. When the announcement was made in the Budget, there had been no consultation with the Department for Culture, Media and Sport, which has responsibility for tourism. I should be grateful if the Minister would confirm whether that is true, and explain why the Government have voluntarily declared that the existing furnished holiday letting rules are incompatible with EU law. The Government usually have to be dragged kicking and screaming before they ever concede one of those points, but on that issue they seemed rather to move ahead of any court judgment.
	Why was there no consultation prior to the publication of the announcement? The Minister says that there will be consultation subsequently, but why has there been no attempt to look more imaginatively at whether there is a revenue-neutral approach that would still provide some protection or favourable treatment to those owning furnished holiday lettings, given the impact that the measure may have on the tourist industry and the unfortunate dynamic effects that may occur?

Stephen Timms: rose—

David Gauke: I was going to conclude, but I will certainly give way.

Stephen Timms: Before the hon. Gentleman concludes, will he acknowledge the point that I made in our debate, which was in Committee not Committee of the whole House, about European constraints on activity here? The arrangements simply support UK-based furnished holiday lets, not those elsewhere in the European Union, and there is an issue.

David Gauke: I do acknowledge that there is an issue, and extending the treatment to EEA properties clearly makes the concession—the favourable tax treatment—more expensive. I absolutely acknowledge that point. The point that I was seeking to draw out is that the Government's usual approach is not to be so proactive in identifying areas of the UK tax system that appear to be in breach of EU law. There is a long list of cases on which the Government have fought long and hard before making the changes, yet on the issue before us they seem to have rushed rather quickly from identifying it to conceding the point that it is in breach of European law. The Government's wording is that it may be in breach of European law, and I do not know whether that prevents them from running into retrospective difficulties, but I do not want to press the Minister on that. There seems to be some enthusiasm for creating the problem as a consequence of European law, and that is not always the case. If the Minister will respond to those points in his remarks, I shall be grateful.
	In conclusion, and returning to the other new clauses in the group, we think that it is vital that everything be done to ensure that the UK has a competitive tax system. In the current fiscal climate, the priority has to be a predictable and workable tax system, and our proposals for an office of tax simplification go some way towards addressing that.

Rob Marris: I want to make a few brief remarks about philosophy, to put it at its most general. Most of my first degree is in sociology, and one thing that I learned during my studies is that people are able to hold contradictory positions. So, for example, it is all the rage for politicians from all parts of the House to talk about decentralisation and local control. We see it most markedly with the national health service. People say, "Let local doctors make decisions, with the local distribution of resources to where health needs are locally determined to be greatest." In the next breath, however, they say, "Oh! It's a national health service and we don't want a postcode lottery." We saw it graphically 12 months ago when the Conservative party's position was that the NHS should not be run from Whitehall and there should be local control. In the very same speech, however, its spokesperson called for a national moratorium on all hospital closures. Both positions may be desirable, but they are contradictory.
	We have seen a certain contradictory nature tonight, and I probed it during my first intervention on the hon. Member for South-West Hertfordshire (Mr. Gauke). On the one hand, the argument runs that we have a tax system that is indeed complex, includes subtleties and allows a measure of discretion; and then in the new clause, we have a proposal for an office of tax simplification, which, were it to proceed not only to be an office but to have a remit for tax simplification, would undoubtedly lead us along the spectrum towards a much more rough and ready system of taxation administration, of decision making on the taxes that should be paid, and so on. That would be rough justice. If that is what the House and the Conservative party want, however, that is an honourable and coherent position.
	The difficulty is when the position becomes contradictory and people start running away from its inevitable trajectory. We have seen it graphically tonight from the hon. Gentleman. The group of amendments before us includes amendment 36, which would set up very small companies' relief and mean greater complexity within the tax system. The hon. Member for Taunton (Mr. Browne) will shortly tell us why the measure is desirable, but let us leave that aside and consider the philosophy. We have very small companies' relief in one amendment and tax simplification as the highlight of another. When I probed the hon. Member for South-West Hertfordshire, he did not make it very clear which way his party would like to go on the very small companies' relief proposal—a proposal of complexity.

Jeremy Browne: Will the hon. Gentleman empathise with my frustration at another Opposition party saying one thing to one group and a completely contradictory thing to another, and seeming to be governed solely by a desire to have attractive headlines in by-election literature, rather than by a coherent alternative vision for government?

Rob Marris: I presume that the hon. Gentleman is talking about the Liberal Democrat "Focus" newsletter published around the country; that is frequently contradictory.

David Gauke: Following the contribution from the hon. Member for Taunton (Mr. Browne), will the hon. Member for Wolverhampton, South-West (Rob Marris) confirm that the age of satire is not dead?

Rob Marris: Indeed not; and the age of chutzpah is upon us.
	I was discussing two of the new clauses in this group. In one, the Conservative party is pushing for tax simplification; that is understandable, coherent and logical, and in theory it might be desirable. At the first whiff of grapeshot, however, the party starts running in the opposite direction—it appears to be doing so on relief for very small companies, and it is certainly doing so on the furnished holiday lettings rules. Again, the rules might be desirable and it might be right for us to keep them; I am not getting into that. I merely give that new clause as an example, within a single group of amendments, of what I am saying.
	The hon. Member for South-West Hertfordshire gives us a lot of stuff about simplification and its desirability. In new clause 4, however, he is saying that a problem exists with the abolition of the beneficial capital gains tax rules for furnished holiday lettings and that he is worried about that favourable treatment being done away with. Doing that, however, would be a simplification.

Brian Binley: The hon. Gentleman is a clever man, and I have admired his comments again and again. However, is he saying that he does not agree with tax simplification? Britain's tax code rivals India's as the largest in the world. Is he saying that that does not harm small businesses?

Rob Marris: What I am saying is that the issues are philosophically and politically much more difficult than is implied by simply standing up and wrapping oneself in the cloak of tax simplification. Life is more difficult than that, as we can see from the group of amendments. I gave those two examples. There are three new clauses and one amendment in the group. I leave aside new clause 6, which is about competitiveness. New clause 3 is about tax simplification. Amendment 36 would add complexity to the taxation of very small companies. In new clause 4, the abolition of a complexity is resisted by those who say that they pursue tax simplification.

Brian Binley: Will the hon. Gentleman stop being a lawyer and tell me whether he believes in tax simplification?

Rob Marris: I am simply saying to the hon. Gentleman that the issues are difficult and that I am not going to stand here and show what I regard as chutzpah, to say the least. I shall use a politer expression. I am not going to say, "Oh yes, tax simplification is wonderful," and then put myself in a contradictory position, as the hon. Member for South-West Hertfordshire has done.
	Within a group of three new clauses and an amendment, the hon. Gentleman has one in favour of simplification and two in which he apparently comes down on the side of complexity. These things are difficult. Simply grandstanding and saying, "I believe in tax simplification," and asking me whether I do, does not help the political discourse of this country.

David Gauke: May I help the hon. Gentleman?

Rob Marris: I don't need any help!

David Gauke: Perhaps the hon. Gentleman should accept some. An amendment in the group has been tabled by the Liberal Democrats, although it appears to have been associated with us. Yes, we have a new clause on furnished holiday lettings; in it, we attempt to probe the Government's thinking, as an Opposition should. We want to press them on a concern about the impact of a tax change they have announced—rather unwillingly I think; they do not seem particularly enthusiastic about the change, although they feel they have to make it.
	We are also setting out an argument for a structure that will move towards a simplified tax system. I do not accept that there is an inherent contradiction. The hon. Gentleman appears to be saying that an amendment tabled by the Liberal Democrats is inconsistent with a new clause tabled by the Conservatives, and that that suggests a contradiction.

Rob Marris: Let us be clear. Let us leave aside Liberal Democrat amendment 36 for the moment; we will get on to that. New clause 4 was tabled by the hon. Gentleman, among others. That new clause is about the tax position of commercially let, furnished holiday accommodation. New clause 3, also tabled by the hon. Gentleman, among others, is to do with tax simplification. All I am pointing out is that the issues are difficult and that simplifying simplification, to coin a phrase, is not helpful. We see it, however, in the position of the hon. Gentleman. He wishes to do the best in respect of commercially let furnished holiday accommodation; I understand his position, although I am not certain that I agree with it. He is concerned about the beneficial capital gains tax regime for that sector of small business being done away with. He wants the favourable treatment, as he called it, to continue. That is counterposed with a demand for tax simplification. All I am saying is that, to me, that is contradictory and demonstrates the difficulties of achieving tax simplification.

Jeremy Browne: It is difficult to follow that devastating dismantling of not only the new clauses put forward by the Conservative party, but the fitness to govern that the party professes to possess. I was impressed when I read in this morning's edition of  The  Times that Conservative Front Benchers are taking guidance on budgetary affairs from the Liberal party of Canada, the sister party of the Liberal Democrats. The article says that when they met the Canadian Liberals,
	"The Conservatives were impressed. Philip Hammond, the Shadow Chief Secretary to the Treasury, and Francis Maude, the Shadow Cabinet minister responsible for policy implementation, requested a private breakfast briefing with the Canadians."
	That is how impressed they were.
	I am not surprised that the Conservative party is looking for guidance and leadership from Liberal parties around the world. I include the Liberal Democrats here in Britain; I say that because new clause 4 looked extremely familiar to me as I leafed through the Order Paper. I soon realised that that was because I tabled the same clause in Committee. I welcome the support from the Conservative party.

Rob Marris: I gently point out to the hon. Gentleman the perils involved in some of these issues. Having carried out a devastating tax-cutting approach as a federal Government in Ottawa, the Liberals lost the general election. They formed a minority Government under Paul Martin, but they fell shortly thereafter.

Jeremy Browne: I defer to the hon. Gentleman's expertise about Canadian politics, although I observe a constant theme: if one wants tough decisions about the future of a country, and balanced budgets, one should look to a Liberal or Liberal Democrat party to make those decisions.
	That gets me neatly to new clause 3, and the hon. Gentleman's dismantling of the credibility of the Conservative party.

Brian Binley: Will the hon. Gentleman give way?

Jeremy Browne: Let me talk for a moment about the difficulty that the hon. Gentleman will face when he makes his point. I very much support simplification. Don't we all? Everybody would rather have a simple system than a complicated one. One of the difficulties faced by businesses and individuals is being confronted by a complex tax code and all kinds of micro-incentives that are meant to change behaviour but actually mean that accountants are needed to fill out relatively simple tax returns. That is to be regretted. The objective of a simpler system is shared by all parties; the question is whether new clause 3 is the right way to advance that objective.

Brian Binley: Does the hon. Gentleman not recognise that in the simplification of any code, the emphasis changes? Part of the code might grow, but the overall effect is for there to be a simpler code in the end. That is how the system works.

Jeremy Browne: My first concern is that I take seriously the speeches of the right hon. Member for Witney (Mr. Cameron); I have no reason to believe that he means to mislead anybody. He made a big speech to the think-tank Reform. I serve on its advisory board, so I had a direct interest in what he said. Yesterday, the right hon. Gentleman spoke about the great threat posed to the public finances of the plethora of quangos, which cost a huge amount to administer. When I heard that I thought, wow, here we have a substantial policy—something that I can really latch on to. I have always struggled to get a real feel for what the right hon. Gentleman believes, but yesterday I thought that, he had raised a tangible issue that meant something. I can tell that Conservative Front Benchers intend to follow that theme through in the House of Commons—lots of amendments and new clauses will be tabled to flesh out the agenda to remove the quango state.
	Then the following day, and although I appreciate that all new clauses had to be tabled before the right hon. Gentleman made his speech, I find a Conservative new clause that proposes a new quango. I ask the hon. Member for South-West Hertfordshire (Mr. Gauke) this very simple question: how much would the head of the quango be paid? We could get into a bigger conversation about the overall cost, because I assume that it would need a secretariat, central London offices, and a new logo. The Conservatives would want its representatives at their party conference, so they would charge the quango lots of money to host fringe meetings there. It would have an entertainments budget—

Madam Deputy Speaker: Order. Will the hon. Gentleman get back to discussing the new clause?

Jeremy Browne: I am grateful for that guidance, Madam Deputy Speaker, but this is directly central to the new clause. This proposed new quango appears to be uncosted. The going rate for chairing such organisations is not cheap, so I can imagine that the person who ran this one would require a big salary, expenses and everything else.

Madam Deputy Speaker: Order. The hon. Gentleman's remarks may well be correct, but perhaps we will restrict ourselves a little more to the terms of the new clause.

Jeremy Browne: I think that I have made my point.
	I am reluctant, in this time of difficult financial circumstances, to write a blank cheque to the Conservatives so that they can keep coming up with expensive quangos that I fear we cannot afford. The hon. Member for Wolverhampton, South-West (Rob Marris) has already mentioned the inconsistency in their argument. For example, we have just had a vote on a new clause tabled by the right hon. Member for Birkenhead (Mr. Field) that would have meant that we had to rejig thresholds, which would have been very hard to do and would have made the tax system more complicated, yet the Conservatives voted for that.
	On the other hand, the shadow Chancellor has a history of being enthusiastic about flat-rate taxes. He came into office saying that he would consider their introduction, but it was only when he did so that he realised how foolish his initial proposal was. At one moment he seems to be in favour of an extreme form of simplification, but earlier this evening he seemed to be in favour of greater complexity.

Theresa Villiers: Surely it is bogus to accuse the Conservative party of undermining the support we have always expressed for simplification just because, on occasion, we support a change in the law that might possibly add one further small complication to the tax system. That argument does not hold together intellectually. We can show general support for simplification while accepting that in certain instances a small degree of additional complication is desirable to achieve policy ends.

Jeremy Browne: I think it is legitimate to explore the motives behind the new clause. My fear—I may be wrong—is that the Conservatives tell different audiences what those people want to hear, even if the messages are contradictory. For example, they tell people who are, rightly, concerned about the size of the budget deficit that the Conservatives are the party that will get to grips with it. Then I read today on the front page of  The Daily Telegraph that they have a wish-list of extra, completely uncosted spending commitments aimed at pleasing people in rural communities. How that is compatible with getting to grips with the budget deficit is a mystery to me. They tell groups who complain that the tax system is insufficiently simple, "Don't you worry—we're bringing in new clause 3 to set up a quango to deal with that", yet the day before they told another group concerned about the growth in the number of quangos that they intended to cut their number. To another interest group that wants great complexity in the system because that would change it to its advantage the Conservatives say that they too favour that greater complexity because they share that interest groups' concerns.
	Let me offer the Conservative party some advice. My party has been in opposition for decades, and my colleagues and I have come to the conclusion that the path that the Conservatives have decided to take is not the right one. It looks superficially attractive to a party that has been in opposition for a long time, as the Conservatives have been, because it seems that it can thereby appease all those different groups and that approach will cumulatively add up to something credible. However, the problem with that approach, as I fear that the Conservatives are increasingly discovering, is that those individual initiatives are less than the sum of their parts and do not add up to an alternative prospectus for government.

Colin Breed: Is the crux of the matter not simplification but fairness? In an attempt to try to make things fairer for people, there are necessarily some complexities. I, for one, would much prefer to have a fairer tax system, even if that made it mildly more complex. When people look at their tax paperwork, they often compare what tax they are paying with that paid by other groups. While complexity can cause difficulties when we are looking to achieve competitiveness and so on, we should be aiming for a much fairer system, even if, at the end of the day, it is slightly more complex.

Jeremy Browne: That is a particularly good point. My hon. Friend may have ruled himself out of the lavishly paid job as part-time chairman of the office of tax simplification, but given that he is not a member of the Conservative party, perhaps he would not have been considered for that role in any case. He makes the entirely reasonable point that although simplification of the tax system is desirable, in a complicated economy it is inevitable that some complexity is needed to ensure that the system is progressive and treats people fairly.
	I spoke about new clause 24 in Committee on 25 June. I am pleased that the Conservatives were impressed by my contribution and felt moved to follow suit in their amendment. Is the possibility that the favourable status enjoyed by furnished holiday lettings may not be compliant with European law sufficient reason to introduce the proposed change? That issue is still hanging over the Government. It would be better if we were more certain about whether we are required to make this change, not least because the Government appear to have acknowledged that they did not consult the Department for Culture, Media and Sport and have not made any intelligent impact assessment of whether the measures would be damaging, particularly to rural and seaside communities in areas such as those in the south-west. It is safe to say that there probably would be an adverse impact, but I am not sure that the Government know precisely what it will be. Surely they should know that before they propose any such measure.
	New clause 6 is self-explanatory. We are all in favour of competitiveness, although the form that the proposed report took would dictate how interesting or useful it would be.
	Amendment 36 would target some additional assistance, at very modest cost, at very small businesses. A form of relief is available to companies with a profit level of less than £300,000, but there are a lot of companies within the range of zero profit to £300,000 profit, and that is quite a big gap. I know that the hon. Member for Northampton, South (Mr. Binley) takes a keen interest in these matters, but it is worth repeating a couple of statistics. According to the Federation of Small Businesses, there are 4.7 million small businesses in the United Kingdom. Ninety-seven per cent. of firms employ fewer than 20 people, and 95 per cent. of firms—19 out of every 20—employ fewer than five people. Cumulatively, those very small businesses are making a significant contribution to the well-being of the economy and to overall employment levels. The amendment would target some additional assistance at companies making profits of less than £25,000—very small, almost micro-businesses would benefit from some additional assistance to help them to get on their feet, to stay profitable and, in time, to grow into bigger and more profitable organisations. It asks the Treasury to consider how that could best be achieved, so it is not excessively prescriptive, although the regulations would require an affirmative resolution to be brought into effect. On that note, I look forward to hearing the Minister's contribution.

David Heathcoat-Amory: I shall not detain the House long, but I wish strongly to support the new clauses tabled by my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke), particularly new clause 3, on simplification, and new clause 6, on competitiveness.
	There is obviously a trade-off between simplification and complexity. These things are never easy, but the entire benefit and tax system in this country has gone much too far towards complexity. There is rough justice in a simple system, but we are now trying to tailor both those systems to take account of every eventuality and the needs of every group. Very often, we cater for the demands of special interest groups and lobbyists rather than try to achieve equality across the board. The result is a system of benefits and tax that nobody really understands and that costs an enormous amount to administer. Nobody really knows what their entitlements are or what taxes they are paying. If we ask people how much tax they pay, either at corporate or personal level, they often do not know. That is bad for democracy.
	I am agnostic on whether we need an office of tax simplification. I simply ask my hon. Friend to think carefully before setting up a permanent, full-time body when there are many outside experts and bodies that would willingly give their time and advice for free, particularly if it was augmented by good special advisers.
	The whole system of special advisers has been corrupted in recent years, and they are now propagandists more often than not, acting as spin doctors at public expense. At their best, however, they provide independent, expert advice. The last Government had an individual in the Treasury called Edward Troup, who came with a great deal of tax and legal experience. He was able to challenge the revenue department and give advice to officials and Ministers from a commercial perspective, which was extremely valuable. Such advice, particularly when associated with some sort of voluntary body, may mean that we do not have to set up a whole new simplification office.
	I have only one point to make on the question of competitiveness, but I want to make it strongly. I reject the notion that international tax competition is bad. Indeed, it is not just the best way but probably the only effective way of countering the relentless upward pressure on tax rates. It is a realistic and effective constraint on Governments to know that if they push taxes up too far, they will lose business and revenue. My hon. Friend gave some good examples of when that has already happened. I am afraid that by international standards, we are now a rather high-tax jurisdiction, and we are paying a daily penalty in the loss of revenue and employment. However, that is an effective constraint.
	Of course, the reaction of Governments is to try to form a tax cartel internationally to prevent tax competition. In 1997, when the Government first came in, they encouraged a European Union package to prevent what was called "harmful tax competition". There was an EU committee, chaired by a Government Minister, to try to form a cartel to keep the EU as a high-tax, high-regulation regime and prevent what it called unfair tax competition. That was defined as meaning any competition that might affect the location of business activity, so almost any lower taxes in any part of the EU could be called unfair.
	What that committee could not do was prevent the rest of the world from providing competition. The obsession with the idea that there is too much tax competition in the EU blinds us to the real challenge, which is whether the EU as a whole is competitive in the wider world. There, too, we are losing altitude. The EU is demonstrably less competitive now than it was 10 or 20 years ago, and we are paying a heavy price in employment and output. The G20 is now on to this, and it is trying to form a cartel to drive out tax competition.
	I strongly support my hon. Friend's aim, which is to ensure that before every Budget, there must be a careful examination of whether it will help or damage Britain's position in the pitiless struggle for international competitiveness. It is much better to promote competition than to form cartels and reach agreements with other member states to prevent it. I hope that the House will divide if the new clauses are not accepted.

Stephen Timms: I think we can all agree that tax competitiveness is important, and it is a good thing that the UK consistently performs well in international comparisons of business environment. The hon. Member for South-West Hertfordshire (Mr. Gauke) told us that we were 15th in the World Economic Forum's global competitiveness report in 2003. I am not quite sure why he chose 2003, but I can tell the House that in the latest edition of that report we are 12th. We have improved our position and are 12th out of 134 countries on the WEF's measure of international business competitiveness. The World Bank's study "Doing Business 2009" ranked the UK sixth out of 181 countries for ease of doing business and second in the EU. It is right that we compare the position in the UK with the position elsewhere, and I am pleased to be able to tell the House that those comparisons put the UK in a strong position.
	On simplification, the Government have brought forward more than 50 measures since the 2007 pre-Budget report, and again we compare favourably, with the World Bank ranking the UK best in the G7 for ease of paying taxes in its 2009 "Paying Taxes" report.
	On consultation, we have consulted formally on more than 50 per cent. of this year's Finance Bill, and informally on substantially more, such as oil taxation. Those affected by that are quite a self-contained community, so a formal consultation is not always necessary. The Government do not, of course, consult on tax rates, owing to the possible market impact and potential forestalling, but we are committed to consultation and our record underlines that.
	Recent business tax reform, such as changes to the taxation of foreign profits, to which the hon. Member for South-West Hertfordshire referred—I am grateful to him and his hon. Friends for their support for our changes—is designed to modernise the corporate tax system to meet the demands of an increasingly globalised economy and to promote more long-term investment. That package will enhance the competitiveness of the UK business environment. I am bound to say that, at 28 per cent., the rate of corporation tax in the UK is at its lowest level ever, and is the lowest in all the G7 economies. The small companies rate, at £300,000, is very competitive internationally, with the highest threshold between the small companies and the larger companies rate.
	Our record on competitiveness is strong. The right hon. Member for Wells (Mr. Heathcoat-Amory) was right to say that tax competition is healthy, but I caution him against criticising the work on harmful tax measures. It is not right to characterise that as the establishment of a cartel, as he suggested. Things have been done that encourage tax avoidance, and it is right for companies to work together on that.
	New clause 3 would establish an office of tax simplification. I was intrigued by the difference between the approach of the hon. Member for South-West Hertfordshire and that of the Leader of the Opposition yesterday. The hon. Gentleman told us that he would explain why that particular quango is a good thing, even though his party is committed to reducing the number of quangos. I missed that part of his speech, but perhaps we will hear it on another occasion. The new clause is unnecessarily bureaucratic. By contrast, we have conducted a series of tax simplification reviews, and we set out our progress in the Budget.

Brian Binley: Of course, it is the Financial Secretary's job to paint everything in the garden as rosy, but does he acknowledge that "Tolley's Yellow Tax Handbook" had 10,134 pages in 2008 and 4,998 pages in 1997, and that the page layout has been changed to get in more words? Is that a rosy situation?

Stephen Timms: The World Bank's assessment shows that we are the best in the G7 for ease of paying taxes—that is the real test of what is happening in our tax system.
	New clause 6 provides that the Government should report to Parliament on the competitiveness of the UK tax system. We already provide a wide range of information in impact assessments of Budget measures, progress reports at the Budget and our annual departmental report. I am not clear that a further report would have the benefits suggested.
	Amendment 36 would pose a serious risk to the fairness of small business taxation. Seventy-five per cent. of UK businesses are unincorporated, so do not pay corporation tax. In proposing benefits for only "very small companies", the Liberal Democrats would disadvantage the 3.5 million unincorporated businesses relative to the small companies with which they directly compete. The amendment would also increase tax-motivated incorporation, helping few businesses and introducing additional complexity. It would also mean an unfunded tax cut.
	As the hon. Member for Taunton (Mr. Browne) said, he moved an identical amendment to new clause 4 in Committee. I was pleased that he did not press it to a vote then, and I hope that Conservative Members will not press it today. We will publish draft legislation and an impact assessment at the time of the pre-Budget report, before the introduction of such a measure in next year's Finance Bill. Treasury officials will be happy to consider any comments on the proposed legislation at that time. The difficulty with European law is clear. I think that we made the right judgment, and there will be an opportunity to reflect on that when the information is published. New clause 4 is unnecessary because the opportunity for which it would provide will be given at the time of the pre-Budget report.
	The new clauses and the amendment would introduce additional complexity and bureaucracy. I hope that hon. Members will not press them to a Division.

David Gauke: The Minister's view of the UK's taxation system is frankly complacent. Professional groups and business organisations have expressed genuine concerns, yet the Government appear to be distant from the real world. I would advise both the Minister and the hon. Member for Taunton (Mr. Browne) to read carefully the speech by my right hon. Friend the Leader of the Opposition, who set out a compelling case for bringing in outside organisations to provide technical expertise to Departments, which is exactly what the office of tax simplification would be. I note that the hon. Gentleman said that he was in favour of simplification, although it was not quite clear why he appears not to be in favour of establishing an office of tax simplification, which would be widely welcomed by many professional groups and business organisations. As a consequence, I intend to press new clause 3 to a vote.

Question put, That the clause be read a Second time.
	 The House divided: Ayes 146, Noes 365.

Question accordingly negatived.

Clause 3
	 — 
	Personal allowance for 2009-10 for those aged under 65

Amendment proposed: 37, page 2, line 10, leave out '£6,475' and insert '£10,000'.—( Mr. Jeremy Browne.)
	 Question put, That the amendment be made.
	 The House divided: Ayes 61, Noes 310.

Question accordingly negatived.

Clause 11
	 — 
	Rates of alcoholic liquor duty

Jeremy Browne: I beg to move amendment 38, page 4, line 34, at end insert—
	'(3A) After subsection (1A) insert—
	"(1AB) The rate under section 36 (1AA)(a) shall be reduced by 2 per cent. for the tax year 2010-11 and by a further 2 per cent. for each subsequent tax year."'.
	By the time the Finance Bill reaches this stage, it is like one of those not very good musicals where the main tunes are reprised throughout so everybody gets an opportunity to hear them several times. That is certainly true of the main themes of this Bill, as we have had further opportunities to discuss income tax and other matters that have already been touched upon both in the Committee of the whole House and in the Public Bill Committee.
	I make no apologies, however, for returning to a theme that I have already visited: Government taxation of alcohol. As several Members have raised this point, let me say at the outset that the amendment deals specifically with beer duty but that I want it to be regarded as illustrative of a wider concern that has been expressed to me: about the Government's approach to alcohol taxation as a whole. Other Members may, of course, wish to speak about different forms of alcohol, and I do not wish to give the impression that I am concerned solely about beer. For many people beer is probably the most high-profile illustration, however, although I and other Members are also concerned about the taxation of cider, spirits, wine, sparkling wine, whisky and other forms of alcoholic beverage.

Stewart Hosie: I am sure many Members are concerned about all sorts of unfairness in the duty regime, but the bit of the Bill that the hon. Gentleman's amendment seeks to change is only about beer. I am not quite sure how, without stretching the patience of the Chair, we can go beyond beer, and the fact that that stands on its own makes all this slightly odd.

Jeremy Browne: Well, let us just talk about beer then, shall we Madam Deputy Speaker?

Madam Deputy Speaker: I think that is an excellent idea, Mr. Browne.

Jeremy Browne: Perhaps we should do that at nine o'clock every evening, Madam Deputy Speaker.
	I shall focus on beer, therefore. The British Beer and Pub Association estimates that 39 pubs are closing every week in Britain, which means that about half a dozen pubs close every day. I do not pretend that it is the role of Government to ensure that every pub stays open indefinitely. I notice that the Conservative party has come up with some uncosted proposals to try to ensure that nothing ever changes in any rural communities regardless of economic circumstances. That is not my view. I realise that good pubs will thrive and become more profitable—and may even expand, if they get planning permission to do so—and that pubs that cannot attract customers are likely to go out of business. I am not trying to question that basic economic assumption.
	There is an underlying problem, however, that goes beyond just changes in lifestyle and drinking practices, although I recognise that more people than in the past now wish to consume beer at home, perhaps while watching a DVD—or the Ashes on television tomorrow—and that they may not be as tempted as they once were to visit a pub. I want to put it on record that there are such changing circumstances, because it is impossible to have a balanced debate if we do not acknowledge that. Even given those considerations, however, we should be concerned that 39 pubs on average are closing every week in Britain, because pubs are more than just businesses: many of them are also the social hub of their community.

Lembit �pik: I am grateful to my hon. Friend for raising this issue, which is of great concern to many Members. Does he agree that, especially in rural communities, the pub is often the social focal point and meeting place for people? The Crown in the town of Montgomery, the Four Crosses pub in Four Crosses and the Lion in Llandinam are all

Madam Deputy Speaker: Order. I think we have got the gist of what the hon. Gentleman is trying to say.

Jeremy Browne: I think I understood the point being made by my hon. Friend. It would have helped me a bit if he had been able to give a few more examples from his constituency, but I agreed with his basic point. It is no coincidence that so many soap operas are set in and around pubs, because they are such an obvious setting in everyday life for social interaction and for opportunities to exchange views and information. I am sure that that is very much the case not only in my constituency, but in the constituencies of other hon. Members present.

Julia Goldsworthy: Does my hon. Friend agree that the beer duty increases will have an impact not only on rural communities where the pub is the hub, but on a lot of smaller breweries, which are very important employers? They will be indirectly affected by any such changes and we should seek to protect them too.

Jeremy Browne: I strongly agree with that observation; I was going to talk about breweries later in my speech, but perhaps I should discuss them right now.

Don Foster: rose

Jeremy Browne: Well, before I do that, I shall give way to my hon. Friend.

Don Foster: Before my hon. Friend moves on, he should continue to list the benefits of pubs in our communities, because they are not just the hub. Surely they are also a place where people can drink much more responsibly than they often do when they have bought pocket-money-priced booze in our supermarkets and off licences. Therefore, will he suggest that instead of going ahead with this ridiculous beer tax and the other increases on duty, the Government should be considering minimum pricing so that we can cut down on the supermarkets' cheap booze in order to solve many of our problems?

Jeremy Browne: That is a very valid point, which also illustrates people's wider concerns about losing pubs. Although people go to pubs to drink beer, in many cases they also enjoy eating in that environment. It has been notable how many pubs have modified their offering to their customers in order to provide food. Pubs also provide entertainment, for example, quizzes and music; karaoke may be popular with some customers, although less so with others. A range of attractions in pubs help to make them part of their community and popular with their customers.

Daniel Rogerson: My hon. Friend has consistently pushed the case for defending pubs on the duty issuelast year and this. I hope that he is also aware of the many services that are often provided in pubs. In recent weeks there have been polling stations in pubs, and my constituency contains a post office in a pub at Strattonthere is also a proposal to bring a post office back to St. Issey in this way. These are the sorts of thing that the pub, as often the last institution in the village, can preserve.

Jeremy Browne: That is also a very good point. The Prince of Wales has campaigned on the notion that The Pub is the Hub. As services get consolidated in rural communities, there will increasingly be a desire for pubs to diversify into not only other aspects of their business, such as food and accommodation, but areas of business that have not previously been associated with pubsfor example, providing stamps and basic groceries such as bread and eggs. Where it is possible to consolidate a post office in a pub and that is thought to be desirable for the community involved, there is no reason why that cannot be sensitively handled in a way beneficial to the people who live in the area, just as a pub and a village shop can be consolidated on one site.
	I was discussing how many pubs are closing each week, but perhaps that point is even better illustrated by looking at what has happened over a slightly longer time scale. Since the 2008 Budgetthat is not too long ago2,200 pubs have closed across Britain.
	According to industry sources, the cost in jobs has been 20,000. Over the same period, beer sales have fallen. It is a common myth that more people are drinking more beer than ever before. There are some people who consume alcoholin beer or in other formsto excess, especially on Friday or Saturday evenings. I take the point made by my hon. Friend the Member for Bath (Mr. Foster) that often it is better and safer for them to do that in a well run and responsibly managed pub than to buy off-licence alcohol and drink it in a park or somewhere similar. If the Government's motivation for levering up taxes is an attempt to choke off demand for beer, I am afraid that that is happening already, to the detriment of both publicans and brewers.

Peter Bone: The hon. Gentleman is, as usual, making a powerful speech. I just wanted to make the point that this is not only happening in rural areas. In my constituency, many small family pubs have closed. The result is that more teenagers are drinking in parks, leading to antisocial behaviour.

Jeremy Browne: The hon. Gentleman makes a fair point. My constituency contains a large townTauntonand a second town, Wellington. Three quarters of my constituents live in those two towns, so large parts of my constituency have urban characteristics, and I see the phenomenon that he has described. In the more rural areas, I see how important pubs arein some cases, they are the only retail outlet in a village, once the post office and shop have gone. So, if people want to put up notices about a local playgroup or information about the village fete, they have to put them up in the pub, because there is no other suitable place.

Lembit �pik: Does my hon. Friend agree that in many small communities where shops and post offices have closed, the public house actually provides social cohesion, without which the villages would become dormitory villages for larger towns? In those circumstances, the school is also likely to close and the sense of community, which made the village such an attractive place, will be dissipated.

Jeremy Browne: That is true, and it is noticeable in rural communities that very few villages have more than one pub, if they have one at all. Those pubs are valued by those who have lived in the village for a long time, but they are also often the main attraction for people looking to move into a rural community, perhaps because they have reached retirement age. They look at a village, say in Somerset, to see whether it would be an attractive place to spend their retirement, and one of the main attractions is a village pub with a nice atmosphere and some good local beers. It is important that both newcomers and long-standing residents support the pub, as it needs sufficient customers to be a viable business for the person who owns and runs it.

David Taylor: If the hon. Gentleman is building the hypothesis that pubs are a good thing but 2,000 a year are closing because of beer duty, it is not a very sound one. He has already mentioned social change and the availability of cheap beer in supermarkets, which are much more important factors. A thirdand most importantfactor is the attitude of the pubcos, which seem to be less concerned about the pubs that were once part of the chains that they owned and more concerned about maintaining their volume through their various other outlets, including supermarkets. Surely we can encourage them to take a more imaginative approach.

Jeremy Browne: I agree with that point. Actually, I agree with all three of the points that the hon. Gentleman made and I would probably add a fourth, which is the smoking ban. I accept that in some pubs that might have attracted more customers, particularly those pubs that have a reputation for serving food. Customers, in many cases, like to eat food without people smoking in the same building. There are other pubs where many of the customers might have felt that their enjoyment of the pub was closely linked to their ability to smoke in that environment, too. That is opening up another debate that I do not wish to open now, but I acknowledged at the outsetperhaps I should have acknowledged it in slightly greater detailthat a number of social and, in some cases, legislative factors have impacted on the ability of pubs to attract customers and to be profitable. I accept that that is the case, but my point is that that difficult economic situation is compounded by above-inflation increases in beer duty.
	Let me explain that point, because it is very important that people understand. I am not simply making a sentimental case for pubs, although I do have a sentimental attachment to them. There are some hard figures that should give the Government cause for reflection. In Januaryfour or five months from nowVAT will increase again by 2.5 per cent. when the Government's temporary VAT reduction expires. In April 2010 and April 2011this has already been factored inbeer duty will increase by 2 per cent. above inflation. That is the so-called duty escalator that was announced last year, so that beer is priced out of the range of people who are seeing, if they are lucky, inflation increases in their salaries. Some people are not even seeing that. A pint of beer is becoming more expensive for people as a proportion of their income and in real terms, too. That is a deliberate instrument of Government policy. That leaves aside whether, for example, the core ingredients are becoming more expensive.
	In other words, fundamental costs are being borne by brewers and passed on. They will eventually go through the pubs to the customer, and so the customer will have to meet that extra cost. For example, they will have to meet brewery or transportation costs, with fuel duty and other considerations of that type. Beyond all those factors there is a built-in increase of 2 per cent. above inflation each year on duty on beer.

Julia Goldsworthy: My hon. Friend is being generous in giving way. Although the hon. Member for North-West Leicestershire (David Taylor) identified a number of other issues that impact on pubs, the reality is that for many pubs, such as the Trengilly WarthaI spoke to the landlord there just a few weeks agothe margins are so small that these changes, which appear to be small on the surface, have a big knock-on effect on their economic viability.

Jeremy Browne: I completely accept that point. That is why I hope that hon. Members from all parties will support amendment 38 tonight. It is very important for all our constituencies.

Simon Hughes: My hon. Friend has waxed lyrical about rural pubs, and I join him in that, but some of us have very urban constituencies. I just want to put it on the record that the same issue applies. The pubs that people would like to go to are the family pubs and the pubs that sell the traditional beersin my constituency, the Fuller's pubs, the Young's pubs and the Shepherd Neame pubs. They do not want to go to the supermarket unless they have to. The pubs that the tourists would want to go to are certainly not better replaced by the supermarket. Tourists want to go to a traditional pub and they want an incentive to do so. The argument applies, and as the son and grandson of a brewer I have to say that I think that the Government are strangling the industry in a way that will be detrimental to urban communities as well as rural and suburban ones.

Jeremy Browne: I completely accept my hon. Friend's point. Let me illustrate my acceptance of his point with an example from my constituency. One of the games widely played in pubs in Somerset, as my hon. Friend the Member for Somerton and Frome (Mr. Heath) will be aware, is skittles. I am a keen player of skittles and people associate skittles with rural pubs. There are skittles leagues and teams attached to village pubs across Somerset and other parts of the west country.
	I recently had the pleasure to visit, as a customer, the Oxford Inn in Halcon in east Taunton, one of Somerset's most urban and socio-economically poorest parts. It has a skittles alley and offers all sorts of entertainment and social events, and it also puts on food buffets built around people's enjoyment of skittles and other activities. The points that I am making are not exclusively true of rural areas: they are very much true of rural areas, but they apply to urban and suburban areas as well.
	I promised my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) that I would talk about the breweries in my constituency. I do not want to let her down by neglecting to take up her invitation.
	There are four beer brewers in my constituency, and a BrewFest is taking place in Wiveliscombe in my constituency later this month. That will be an opportunity for people from all over that part of Somerset, and even perhaps from Devon, to visit Wiveliscombe and enjoy the beers brewed there by Cotleigh Brewery Ltd and by Exmoor Ales. Both produce large numbers of popular beers for pubs and off-licence sale, in my constituency and further afield.
	The other two brewers in my constituency are much smaller. Confusingly, Quantock Brewery is based not in the Quantocks but in a place called Chelston just outside Wellington, while Taunton Brewing Company is not in Taunton but in West Bagborough

Madam Deputy Speaker: Order. Some of the breweries may not be where they should be, according to the hon. Gentleman, but I hope that he will concentrate his remarks a little more on the amendment.

Jeremy Browne: Sadly, Madam Deputy Speaker, that is the sum total of breweries in my constituency, but I am doing my best to make setting up new ones an attractive proposition for people.
	My point is that all those breweries are directly affected by reductions in beer sales. That may sound like a statement of the obvious, but we tend to concentrate on the business at the end of the supply chainthat is, the pub landlord selling a pint of beer to the customer. However, the breweries are also employers in my area. They are more than just employers, too, as they are also part of the heritage and fabric of the area.
	People in Taunton Deane or Somerset as a whole enjoy having their local breweries, believing that they add to the character of the community and that there is something distinctive about them that helps to define our area. Indeed, people visiting on holiday from London, Birmingham or elsewhere in the country feel that having an opportunity to drink in a pub in my constituency a pint of beer that has been brewed in Wiveliscombe or somewhere else in Somerset is part of their enjoyment as a visitor to the county. It would be extremely sad if that were to be affected.
	As I said, I accept that people can choose soft drinks, wine or something else instead of beer. I am not trying to compel people to drink beers brewed in breweries in my constituency, although I sometimes think that they would benefit from the experience. It may be that their life would be poorer if they missed that opportunity, but I am not compelling anyone to drink them. What I do not want, however, is businesses to be placed in jeopardy as a direct consequence of the Government's imposition of above-inflation duty increases on beer.

Greg Hands: Before the hon. Gentleman concludes, will he explain what amendment 38 means? It seems to set up some sort of reverse escalator, but will he go through the mechanics of how the amendment might work?

Jeremy Browne: I will, but I am trying to put in place a simple measure to do precisely what the hon. Gentleman says. If the Government felt that the amendment was technically deficient, I would be happy if they sought to make changes to it. As has happened in previous years when emergency measures have been introduced in the PBR, more emergency measures could be brought in this autumn, if the Government felt that they were needed.
	The simple fact is that the Government are increasing beer duty by 2 per cent. above inflation every yearthe so-called duty escalator, as I have said. The amendment would not change the duty for this year, as that has been passed and set in stone already, but it would reduce the duty by 2 per cent. next year and in subsequent years. What I am effectively trying to do, and I hope the mechanism achieves that objective, is to cancel out the effects of the so-called escalator which, for the reasons that I have given, I regard as damaging.

Stewart Hosie: On a technical point, the first part is correct
	shall be reduced by 2 per cent. for the tax year 2010-11,
	but the amendment then reads
	and by a further 2 per cent.
	If it said, by 2 per cent. for subsequent years, I would understand that, but
	by a further 2 per cent.
	indicates to me, if I have read it correctly, a reduction in the level of duty, rather than a stabilisation of it and the reversal of the escalator only.

Jeremy Browne: That would be an extremely popular measure, but it is not my intention.  [Interruption.] The hon. Member for Hammersmith and Fulham (Mr. Hands) says that is what the amendment says. I suppose it depends how one interprets the word further. The effect that I sought to achieve was to say that the Government should feel free to put up duty in line with inflation. Most people would accept that that is a reasonable way to proceed, but the escalator that is over and above inflation is damaging pubs and breweries, for the reasons that I have given.

David Taylor: rose

Jeremy Browne: I was about to conclude to give others an opportunity, but I give way to the hon. Gentleman.

David Taylor: I am pleased that the hon. Gentleman had not yet concluded. It was all too easy in the past to be critical of Liberals, who were rather relaxed about fiscal policy and did not put figures to the changes that they were suggesting. What would be the reduction in Government revenue resulting from amendment 38, and how would the hon. Gentleman replace that revenue?

Jeremy Browne: I am entirely sure that I accept the premise of the hon. Gentleman's intervention. Perhaps I did not explain clearly enough at the beginning. Beer sales dropped by 8.2 per cent. in the first quarter of 2009, and since the Budget last year 2,200 pubs have closed. The opportunities for people to buy beer are diminishing rapidly as pubs close, and the total beer sales in all outlets are falling, so the amount of revenue that the Government are collecting is off a diminishing base. I fear that any assumptions that the Government make about increasing revenue from above-inflation beer duty increases may not be borne out by their experience when they come to add up the money that they hope will come into their coffers. That is quite apart from the wider social benefits that I touched on earlier in my speech. They are difficult to quantify, but everyone would acknowledge that in both urban and rural areas, there are those wider benefits. I caution the hon. Gentleman about knowing the price of everything and the value of nothing, as people used to say. That would be an unfortunate position for the Labour party to adopt, and the costs in this case are unlikely to be a consideration that need unduly concern Ministers.
	On Friday 17 July I will be pulling a pint at the Maypole Inn in Thurloxton

Madam Deputy Speaker: Order. The hon. Gentleman will relate that, I am sure, to the amendment that we are discussing.

Jeremy Browne: Indeed, Madam Deputy Speaker. I will be celebrating Proud of Pubs week. I thought that would be a suitable way to demonstrate the pride that I have in pubs in my constituency, and I hope that all Members present who are proud of pubs and of breweries and who see the benefit of those institutions flourishing in their community will support amendment 38.

Greg Hands: It is always a pleasure to follow the hon. Member for Taunton (Mr. Browne). I, too, will be celebrating Proud of Pubs week on the same evening, but almost certainly in a different establishment. I enjoyed sparring with the hon. Gentleman in Committee on this and many other duties. I agreed with a great deal of what he had to say; I just thought it a pity that he did not properly explain the amendment before us, because it has a number of problems that need probing.
	Nevertheless, we seem to be making a habit of debating alcohol duty only very late at night or at the end of the day. [Hon. Members: Last orders!] Last orders indeed, although not quite, under the old world. During Committee of the whole House on 12 May, I spoke on alcohol duties for an hour and a quarter either side of midnightwell after what I used to think of as closing time. I shall not repeat my arguments and certainly will not go on for as long, but we had an entertaining debate about the serious subject of alcohol duties, and various Members joined the debate late, including the hon. Member for Morley and Rothwell (Colin Challen), who intervened on a Liberal Democrat Member at two minutes past 1 in the morning to say that
	the increase in duty on beer imposed in the Budget is 1p. In my local, which I attend regularlyI do not know whether the hon. Gentleman attends histhe price of a pint has gone up by 10p.
	He went on to ask at six minutes past 1 in the morning:
	How does the price of whisky, with which I must admit I have a certain affinity, compare with the RPI?[ Official Report, 12 May 2009; Vol. 492, c. 822-823.]
	We had various other contributions from a collection of Members from all-party groups, some of whom appeared to have come straight out of intense discussions on the various duties involved. I do not know whether we can expect such interventions this evening, but alcohol duties are a serious matter, affecting not only a huge number of consumers but a large number of employers and employees. There are also issues about problem drinking and alcohol-induced crime.
	The hon. Member for Taunton pointed out that the sector is under pressure, and on that point I very much agree. Part of that tale of woe is due to the big increases in beer duty, so let us examine what the Government have done since they introduced their duty escalator at the previous Budget. They put duty up across the board by 6 per cent.; then it went up again by a further 8 per cent. when VAT fell in the pre-Budget report; and we now have a 2 per cent. across-the-board increase in this year's Budget.

Lembit �pik: The hon. Gentleman may be coming to this point, but does he agree that, given the level of pub closures and the change in drinking habits, it seems extremely improbable that the Government made any holistic analysis of the net effect on the economy? Leaving aside our discussions on pubs, as a result of the changes there has probably been a net reduction in revenue to the Government, rather than an increase.

Greg Hands: The hon. Gentleman makes a very strong point. In fact, the amount of revenue has undershot Red Book projections for each of the past two years, so that point would seem to bear out evidence that the sector is under severe pressure.

Kelvin Hopkins: I strongly support the Government's policy on alcohol prices, so will the hon. Gentleman not accept that over several decades the real price of alcoholic beverages has fallen substantially; that that is a major contributor to the current rather excessive alcohol consumption by young people, in particular; and that there are health as well as revenue concerns?

Greg Hands: The hon. Gentleman makes a reasonable point, although it ignores the fact that beer consumption has fallen steadily for the past 30 years, and that alcohol consumption overall has fallen for the past four. Although he refers to a long trend, it may have reversed over the past three or four years.
	I shall now discuss the amendment itself.

Don Foster: Just before the hon. Gentleman moves on, I note that he said that the hon. Member for Luton, North (Kelvin Hopkins) made a reasonable point. Surely, however, the key differential that influences the appalling behaviour on the streets of many of our towns and cities is that between the cost of beer in our pubs and the ridiculously cheap price of beer in our supermarkets. The same is true of other drinks. That is the differential we ought to address.

Greg Hands: The hon. Gentleman makes a good point, although we must recognise that there are difficulties concerning the duty regime on beer and other alcohol served in pubs, vis--vis supermarkets. Nevertheless, he makes a strong point, which we would like to look at.
	We have not spoken about amendment 38 in any detail. As the hon. Member for Taunton knows, I pay close attention to the text of his amendments, and I have to say that his amendment would insert its new Subsection (3A) in the wrong place. It would insert his reverse beer escalator in line 34, between two subsections on low and medium-strength cider. It should actually be inserted in line 30. Furthermore, the Lib Dem amendment, taken in totality with the Bill's existing provision on beer duty, would see beer duty first rise this year by 10.5 per cent. and then fall each year by 2 per cent. because of that insertion into line 34. That seems an odd policyless an escalator and more an escarpment, with a steep increase this year followed by a shallower descent for all years thereafter.

Jeremy Browne: Will the hon. Gentleman give way?

Greg Hands: I will not because we are short of time. According to the amendment, the new beer escalatorin effect a reverse of Labour's current RPI plus 2 per cent. escalatorwould go on for ever. Nor is it clear whether the annual 2 per cent. reduction in duty would mean 2 per cent. off today's figure of 16.47 in the original clause or 2 per cent. off the figure as amended. In other words, are the 2 per cent. reductions linear or cumulative? In the second year, would the figure be 98 per cent. of the original figure, or 98 per cent. of the 98 per cent. that was affected the previous year?
	If the reductions are linear, the Lib Dem amendment implies that beer duty would be eliminated entirely in 50 years' time; it might even imply that beer duty would go negative from the year 2060. That raises the tantalising prospect of the Liberal Democrats paying people to drink beer. That gives a new twist to their populist policies; they are like a desperate candidate in a student union election in their efforts to court the popular and youth votes. It appears, at least from amendment 38, that they are already reaching out to my grandchildren with an offer of booze not only free of tax, but subsidised by the state from 2060. Here we have it: the Liberal Democrats seemingly proposing that the state should pay people to drink beer. That cannot make any sense, and that is why we cannot support amendment 38.

Kelvin Hopkins: I want to make two brief and simple points. The chief medical officer has suggested that alcohol should be taxed according to the alcoholic content of beverages. That would have the enormously beneficial effect of raising prices in supermarkets and having little effect on pub prices. That would help the pub trade and reduce irresponsible drinking.
	My other point is that we have a vast ocean of untaxed, cheap alcohol coming in from Europe, and the Government get almost no revenue from it. If we reduced the amount of alcohol coming in and taxed it properly, Government revenues would increase and there would be less irresponsible drinking. Those two points should be taken on board by the Government and everybody in the Chamber. I hope that, in time, we move in that direction.

Peter Bone: I shall not detain the House for long, although I should say that it is a pleasure to speak at slightly earlier than 10 minutes to midnight, as I did in Committee.
	I entirely agree with my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands), who exposed the technical faults in the amendment tabled by the hon. Member for Taunton (Mr. Browne). However, the hon. Gentleman's heart is entirely in the right place. It is wrong for there to be a duty escalator on alcohol, going up and up. The Government should decide at each Budget what the duty should be, depending on the economic circumstances. I have seen pubs close in Wellingborough, Rushden and Irchester, and this is not the time for a duty escalator. Although I cannot support the hon. Gentleman's amendment, I certainly think his heart is in the right place.

Sarah McCarthy-Fry: I, too, have read the  Hansard report of the debate in Committee of the whole House when alcohol duties were debated. It went down many highways and byways, and I hoped that we would not have a repetition of that this evening, because I would have had to bone up on all the pubs that I have visited in my constituency. I can tell hon. Members that in the 1960s there were more than 300 pubs on Portsea island alone, because a friend of mine wrote a book about them. However, I am sure, Mr. Speaker, that you would not want me to go down that road.
	Alcohol duties play an important role in contributing to the public finances. The amendment would significantly reduce the revenue that the Government receive, thus weakening the public finances, notwithstanding the arguments made by the hon. Member for Taunton (Mr. Browne). The amendment deals only with beer duty, not that on other alcohol products. On the rate of duty, my predecessor, my hon. Friend the Member for Wallasey (Angela Eagle), noted in Committee of the whole House
	that, for fairness, it was right to have 2 per cent. across the board this time round.[ Official Report, 12 May 2009; Vol. 492, c. 815.]
	Furthermore, it would not be possible for us to accept the amendment as the European Court of Justice has ruled that duty on beer should be maintained within a set ratio with duty on wine. Such a continued reduction in beer duty would breach that ratio in the absence of similar provisions for wine. There are several constraints in EU law as regards alcohol. Beer must be taxed at an equivalent rate to wine and in direct proportion to degrees of alcohol strength. We are allowed to have reduced rates for small breweries, and we do so. It is also possible to set a reduced rate on beer with a strength of below 2.8 per cent. alcohol by volume. The pub industry proposed a zero rate for low-strength beers, its rationale being that it is easier to manufacture ale and stout. However, when we looked at the possible consequences, there was no evidence to suggest that people would opt to drop down to those reduced strengths.

Greg Hands: Can the Minister explain how the Government's escalator currently works? Is it still based on RPI plus 2 per cent.? If so, at a time when RPI is negative, why was the increase in beer duty nevertheless 2 per cent.?

Sarah McCarthy-Fry: Because we work on a zero base. It is an increase of 2 per cent. on zero, and it would not go back below that figure even though inflation is negative, so it is staying at 2 per cent.
	As with all tax policy decisions, the Government will monitor the impact of alcohol duty, including the impact on the pub industry. However, I am sure that hon. Members will acknowledgeindeed, they have done sothat the competitiveness and employment levels in any industry depend on a large range of factors. The pub sector has been adversely affected by the economic downturn, as well as by changing tastes and lifestyles over a longer time periodnowadays there are many more ways to spend leisure time. Increased input costs for suppliers and the smoking ban have also had an effect.
	Changes in duty are unlikely to be the answer to tackling those problems. Indeed, the proportion of taxduty and VATin the price of a pint of beer in a pub has remained broadly constant in real terms since 1994. In the Treasury Committee on 28 April, a member of the experts panel, Mr. Weale from the National Institute of Economic and Social Research, said:
	with beer...All the evidence is that
	it is
	not terribly price sensitive.
	However, the Government recognise and value the contribution that pubs make to employment and local communities. Although under EU tax legislation it is not possible to provide tax reliefs targeted specifically at pubs, such as taxing beer sold in supermarkets differently from that sold in pubs, the Government have introduced a range of measures to support all businesses, including the British pub. Those include: enabling pubs to spread payment of this year's inflation uprating to business rates over three years; HMRC's business payment support service, which has benefited many pubs already; improved access to finance for small businesses through the enterprise finance guarantee; and support through low-cost loans and advice on energy efficiency for small businesses, including many pubs, to make savings on their energy bills.
	An approach suggested by the industry has been a reduced rate for cask beer, which, again, is not currently possible under EU legislation. As many hon. Members will be aware, however, there is a planned review by the European Commission of EU alcohol rates and structures, which will provide an opportunity for the beer and pub industry to put proposals to the Commission on a reduced rate for cask beer.

Kelvin Hopkins: I thank my hon. Friend for giving way. I am somewhat concerned about this emphasis on the EU, because if the EU determined our tax and duty levels they would be substantially reduced, which would be damaging to both revenues and health.

Sarah McCarthy-Fry: I have already explained some of the constraints in EU alcohol law, but I picked out the ones on beer because that is referred to in the amendment. There are many others, such as the fact that wine must be taxed at the same rateabove 8.5 per cent. and not exceeding 15 per cent.as must still cider. Those are among the directives that are under review for 2010. When the new Commission is in place, a work programme will be published.
	Various strands to that work are currently under discussion, encompassing possible assistance for small and medium-sized enterprises, the classification of alcoholic products with specific attention to mixtures of distilled and fermented alcohols, and possible standardisation of denaturants. The UK has been working closely with the Commission to work towards a more modern structure that supports UK trade. Progress so far has been good, and initial findings have been in line with what the UK has been pressing for.

Linda Gilroy: A moment ago, my hon. Friend the Member for Luton, North (Kelvin Hopkins) mentioned the unit price of alcohol suggested by the chief medical officer for health reasons. Is it likely that the review will enable us to take a serious look at that as a potential policy on alcohol duty?

Sarah McCarthy-Fry: I am sure that it is possible, but I do not know whether that precise matter is in the terms of reference of the review. As I said, the work programme will not be published until the new Commission is in place. I am sure that Members will appreciate that changes to the European excise rules governing alcohol duties require unanimous agreement from all 27 member states, so it could be a long process.
	Given the points that I have made, not least about the legal constraints in the current EU directives and the fiscal consequences of the amendment, I ask the hon. Member for Taunton to withdraw it.

Jeremy Browne: I question the Minister's statement that beer is not a price-sensitive commodity.

Sarah McCarthy-Fry: May I just clarify that that was not my statement? It was a quotation from one of the expert witnesses to the Treasury Committee.

Jeremy Browne: Let me start again. I question the so-called expert's statement that beer is not price-sensitive, or the Minister's acceptance of that statement, because if it were as self-evidently true as she claims, I would not hear Ministers and others express such concern about happy hours and other forms of alcohol promotion.
	I say to the Conservatives that the objective of the amendment is to cancel out and neutralise the escalator that the Government have introduced. I shall leave aside the strange assertion by the hon. Member for Hammersmith and Fulham (Mr. Hands) that if one takes 2 per cent. off a figure every year, it gets down to zero. I cannot see how it would ever get to zero, but we will leave that bit of innumeracy to one side. I regret that although the Conservatives talk a good game on this matter, I have to ask where their amendment is. Why is it always left to the Liberal Democrats to defend pubs and breweries? Why are the so-called official Opposition so negligent in that regard?
	Both because it is the responsibility of my party, and sadly often that of my party alone, to champion this important community interest, and because the arguments made by the Conservative spokesman and the Exchequer Secretary fell short of what I had hoped for, I should like to press the amendment to a Division.

Question put, That the amendment be made.
	 The House divided: Ayes 62, Noes 311.

Question accordingly negatived.
	 Ordered, That further consideration be now adjourned.  (David Wright.)
	 Bill to be further considered tomorrow.

Business without Debate

DELEGATED LEGISLATION

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Identity Cards

That the draft Identity Cards Act 2006 (Application and Issue of ID Card and Notification of Changes) Regulations 2009, which were laid before this House on 9 June, be approved. (David Wright.)
	 The Speaker's opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 8 July (Standing Order No. 41A).
	 Motion made, and Question put forthwith (Standing Order No. 118(6)),

identity cards

That the draft Identity Cards Act 2006 (Prescribed Information) Regulations 2009, which were laid before this House on 9 June, be approved. (David Wright.)
	 The Speaker's opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 8 July (Standing Order No. 41A).
	 Motion made, and Question put forthwith (Standing Order No. 118(6)),

Banks and Banking

That the draft Banking Act 2009 (Restriction of Partial Property Transfers) (Amendment) Order 2009, which was laid before this House on 10 June, be approved .( David Wright. )
	 Question agreed to.

EUROPEAN UNION DOCUMENTS

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Preliminary Draft Budget 2010

That this House takes note of the unnumbered Explanatory Memorandum dated 1 June 2009 from HM Treasury on the Preliminary Draft Budget of the European Communities for the year 2010; and supports the Government's efforts to maintain budget discipline in relation to the budget of the European Communities. (David Wright.)
	 The Speaker's opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 8 July (Standing Order No. 41A).

GOVERNMENT POLICY (TORTURE OVERSEAS)

Motion made, and Question proposed, That this House do now adjourn. (David Wright.)

Mr. Speaker: Before I call the right hon. Member for Haltemprice and Howden (David Davis) to speak, I want to advise him that he should not refer to cases in relation to which legal proceedings are active.

David Davis: Four years ago today, this country suffered a terrible atrocity at the hands of terrorists: 52 people were killed and many more horribly injured. I stood at the Dispatch Box that day and spoke of the need to face down this barbarism. In the subsequent weeks and months, I was proud of the calm and just way that the ordinary British citizen dealt with this assault and of the comparative absence of people trying to make scapegoats of the ordinary, decent Muslim community. I was proud of the courage, sense of honour, tolerance and justice of our citizens at home.
	I am afraid that I cannot be so complimentary about the actions of our Government abroad. In the last year, there have been at least 15 cases of British citizens or British residents claiming to be tortured by foreign intelligence agencies with the knowledge, complicity and, in some cases, presence of British intelligence officers. One casethat of Binyam Mohammedhas been referred to the police by the Attorney-General, which implies that there is at least a prima facie case to answer. The most salient others include Moazzamm Begg, Tariq Mahmoud, Salahuddin Amin and Rashid Rauf, all in Pakistan; Jamil Rahman in Bangladesh; Alam Ghafoor in United Arab Emirates; and Azhar Khan and others in Egypt.
	For each case, the Government have denied complicity, but at the same time fiercely defended the secrecy of their actions, making it impossible to put the full facts in the public domain, despite the clear public interest in doing so. Although the combined circumstantial evidence of complicity in all these cases is overwhelming, it has not so far been possiblebecause of the Government's improper use of state secrecy to cover up the evidenceto establish absolutely clear sequences of cause and effect.
	In the case I am about to describe, we can follow the entire chain of events from original suspicion, through active encouragement of the Pakistani authorities to arrest and through the subsequent collaboration between UK and Pakistani agencies. This is the case of Rangzieb Ahmed, a convicted terrorist, whose treatment I can describe in some detail.
	As the House will realise, the account I am about to relay comes from several sources. I cannot properly give my sources, given the vindictive attitude of this Government, particularly the Foreign Office, to whistleblowers. Indeed, in this case of Rangzieb Ahmed, the authorities were so paranoid that they threatened to arrest a journalist for reporting facts stated in open court. Nevertheless, although I am prevented from naming my sources, I can say that I am confident of these facts beyond reasonable doubt. I will not, of course, disclose any names, or anything that discloses intelligence agency techniquesother than tortureor other issues that threaten national security.
	I should say that the individual whose case I am going to describe is not someone for whom I have any natural sympathy. He is a convictedindeed, self-confessedterrorist. So what I am talking about today is just as much about defending our own civilised standards as it is about deploring what was done to this man in the name of defending our country.
	In 2005-06, Rangzieb Ahmed was a suspected terrorist who was kept under surveillance for about a year before leaving the country to go first to Dubai and on a subsequent trip to Pakistan. During that time, evidence was collected against him, on the basis of which he was later convicted. Let me repeat that point, as it is very important to my subsequent argumentduring that time, evidence was collected, on the basis of which he was subsequently convicted.
	Despite the authorities having that evidence, he wasastonishinglynot arrested but instead allowed to leave the country. To understand how odd this decision was, we should remember that this was only a year after the tragedy of 7/7, after which agencies were criticised for allowing terrorist suspects to leave the country to go to Pakistan. Since they knew he was leaving, since they knew where he was going, and since they had more than enough evidence to arrest him, allowing him to leave was clearly deliberate. That the authorities knew his itinerary is demonstrated by the fact that he was kept under surveillance when he was in Dubai. He later went on to Pakistan, where the Pakistani authorities were warned of his arrival by the British Government. The British intelligence agencies wrote to their opposite numbers in Pakistanthe members of the directorate for Inter-Services Intelligencesuggesting that they arrest him. I use the word suggest rather than request or recommend because of the peculiar language of the ISI's communication No doubt the Minister can confirm that for himself by asking to see the record.
	We also know that the intelligence officer who wrote to the Pakistanis did so in full knowledge of the normal methods used by the ISI against terrorist suspects that it holds. That is unsurprising, as it is common public knowledge in Pakistan. The officer would therefore be aware that suggesting arrest was equivalent to suggesting torture.
	Rangzieb Ahmed was arrested by the ISI on 20 August 2006. Once he was taken into custody in Pakistan by the ISI, the Manchester police and MI5 together created a list of questions to be put to him. MI5 arranged for those questions to be given to the ISI.
	Rangzieb Ahmed was viciously tortured by the ISI. He says, among other things, that he was beaten with wooden staves the size of cricket stumps and whipped with a 3 ft length of tyre rubber nailed to a wooden handle, and that three fingernails were removed from his left hand. There is a dispute between Ahmed and British intelligence officers about exactly when his fingernails were removed, but an independent pathologist employed by the Crown Prosecution Service confirmed that it happened during the period when he was in Pakistani custody.
	Rangzieb was asked questions, under torture, about the UK by ISI officers. He claims that he saw UK/Pakistan Secret on the question list used by the ISI. That was presumably the list put together by the Manchester police and MI5. After about 13 days, he was visited by an officer from MI5 and another from MI6. He claims to have told them, during questioning, that he had been tortured. They deny that, but it is significant that they did not return for further interviews. By that stage, MI5 policy was not to return after any interview in which the subject claimed that he had been tortured. The British agents did not return, but Rangzieb was subsequently questioned by Americans.
	Is it also an extraordinary, if sinister, coincidence that the Manchester police accessed Rangzieb Ahmed's medical records within days of the MI5/MI6 interview? Why would they do that if he was in perfect health?
	Rangzieb Ahmed was kept in detention by the Pakistani authorities for a total of 13 monthsfirst at the ISI centre, then at Rawalpindi and then at Adiyala jailbefore being deported to the United Kingdom in September 2007. He was tried and convicted of terrorist offences in late 2008according to the prosecution, entirely on the basis of evidence obtained while he was under surveillance in the UK and Dubai in 2005-06. I cannot imagine a more obvious case of the outsourcing of torture, a more obvious case of passive rendition.
	Let me recap. Rangzieb Ahmed should have been arrested by the UK in 2006, but he was not. The authorities knew that he intended to travel to Pakistan, so they should have prevented that; instead, they suggested that the ISI arrest him. They knew that he would be tortured, and they arranged to construct a list of questions and supply it to the ISI.
	The authorities know full well that this story is an evidential showcase for the policy of complicity in torture, should that evidence ever come out. One way in which the in-camera veil of secrecy might be lifted would be a civil case by Mr. Ahmed against the Government for their complicity in torture. Part of that process would involve challenging the in-camera rulings and revealing the details of agency involvement. Just such a case was being considered by Mr. Ahmed, and on 20 April this year he was visited in prison by his solicitor and a specialist legal adviser to discuss it.
	Mr. Ahmed tells us that a week later he was visited by an officer from MI5 and a policeman. That is the story told today on the front pages of the  Daily Mail and  The  Guardian. During the course of their visit they said that they would like him to help in the fight against terror with information about extremism. This is perfectly proper.
	However, the sinister part of this visit was an alleged request to drop his allegations of torture: if he did that, they could get his sentence cut and possibly give him some money. If this request to drop the torture case is true, it is frankly monstrous. It would at the very least be a criminal misuse of the powers and funds under the Government's Contest strategy, and at worst a conspiracy to pervert the course of justice.
	I would normally be disinclined to believe the word of a convicted terrorist. However, when he initially told his lawyer about it, he did not want to pursue the matter. Also, in common with many other criminals, after the scandal of the taping of the current Minister of State, Department for Transport, the right hon. Member for Tooting (Mr. Khan), on a prison visit, he believes all these meetings are taped and he says this will back him up.
	Given that belief, he is unlikely to have made an allegation that would be so easily proven wrong. I do not believe the conversation was taped, but it would have been videoed and this could be used to check his story. For reasons of policy and natural justice, it is imperative that the Crown Prosecution service investigates this allegation immediately, but that is not my principal concern today.
	My questions to the Minister are as follows. First, will he undertake to look at the in-camera court records and the records of the police and intelligence agencies so that he can confirm for his own satisfaction that my account of the handling of Rangzieb Ahmed pre-trial is correct? That process should take only a few days. Secondly, will he publish the current guidelines governing the agencies handling the suspected torture so that we can see whether the UK authorities broke those guidelines or whether it was the policy that was at fault? The Prime Minister has undertaken to publish the new guidelines, so if the Minister cannot publish the current ones, can he explain why his approach is different to the Prime Minister's?
	Thirdly, I believe, but cannot be certain to an evidential level, that the judge in the court case intimated that disciplinary action should be considered within the intelligence agencies. Was this done? If not, why not?
	Finally, can the Minister now announce a proper judicial inquiry into the allegations of UK complicity in torture, since it is now clear that there is not just circumstantial evidence but hard evidence in government records for Ministers to read, if they had but eyes to see?
	Let me conclude by saying that our handling of the subject of torture has, in my view, been completely wrong. The Americans have made a clean breast of their complicity, while explicitly not prosecuting the junior officers who were acting under instruction at a time of enormous duress and perceived threat after 9/11. We have done the opposite. As things stand, we are awaiting a police investigation that will presumably end in the prosecution of the front-line officers involved. At the same time, the Government are fighting tooth and nail to use state secrecy to cover up crimes and political embarrassments to protect those who are probably the real villains in the piecethose who approved these policies in the first place.
	The battle against terrorism is not just a fight for life; it is a battle of ideas and ideals. It is a battle between good and evil, between civilisation and barbarism. In that fight, we should never allow our standards to drop to those of our enemies. We cannot defend our civilisation by giving up the values of that civilisation. I hope the Minister will today help me in ensuring that we find out what has gone wrong so we can return to defending those values once again.

Ivan Lewis: I begin by congratulating the right hon. Member for Haltemprice and Howden (David Davis) on securing this important debate. I believe that he has sincere, genuine and long-standing concerns in this issue and I will try to do justice to the points that he makes.
	I recall the responsible and non-partisan way in which the right hon. Gentleman behaved in the aftermath of the dreadful London bombings. He sought no political advantage, but sought to be a source of unity in this House and throughout the country along with my Front-Bench predecessors. Therefore, my only criticism of him this evening is that, during the course of the debate on these issues, he has repeated unsubstantiated accusations as fact. That is a departure from the way in which he has sought to approach these issues in the past.
	I am sure that the right hon. Gentleman is aware that in both of the cases where these issues have been raisedone of which he has mentionedthe individuals concerned, Rangzieb Ahmed and Salahuddin Amin, have been convicted of terrorism offences and no evidence was found to substantiate the claims of UK involvement in mistreatment. Indeed, the gentleman to whom the right hon. Gentleman referred, Rangzieb Ahmed, was recently interviewed in his cell by  The Guardian with a Ministry of Justice press official present and the record of this is yet to appear in the media. The same gentleman has an outstanding application for leave to appeal, which, as an active proceeding in a UK court, cannot be referred to in any motion, debate or question, as you are fully aware, Mr. Speaker. Therefore, Mr. Ahmed's case should not be discussed further at present. In both cases, torture allegations were considered only to the extent that they were relevant to the criminal cases. Therefore, the degree to which they have been addressed should not be overstated. The right hon. Gentleman has brought these issues to the House tonight, but he is aware that I am very constrained in my capacity to respond directly to the accusations he makes. However, I will attempt to do justice to the general points that he has alluded to both in the past and in this debate.
	I want to place it on record that the Government's policy is that torture is an abhorrent crime and we are fundamentally opposed to it. That principle guides all of the Government's work, including that of the intelligence agencies and armed forces. The Prime Minister addressed recent concerns about the involvement of the security services and armed forces in detention activities in his statement to the House of 18 March. That statement laid out measures to be taken to address these concerns.
	International action against torture has been a priority for the Government since the launch of the United Kingdom initiative in 1998. This includes efforts to support wider ratification and implementation of the United Nations convention against torture and the optional protocol to the convention against torture through a combination of bilateral lobbying campaigns, multilateral engagement in the European Union and UN and project work.
	For the period 2008-2011, the UK has allocated 5.5 million for overseas criminal justice, prison reform and torture prevention projects. The UK also supports strongly the work of the Association for the Prevention of Torture, the leading non-governmental organisation, which advocated the adoption of the optional protocol to the convention against torture and continues to campaign for its ratification.
	My point is that the Government have taken a proactive approach to the work internationally against torture. If that is the case, how is that consistent with the right hon. Gentleman's accusation that the UK Government have colluded in the use of torture? I say with respect to him that the two do not coincide, and that this is not a consistent statement of the facts.
	I also say to the right hon. Gentleman that ensuring the welfare of detained British nationals is a priority in the Foreign and Commonwealth Office's consular work. Any allegation of abuse is treated very seriously. All consular staff receive training which covers prisoner issues, including what to do when they have concerns over torture or mistreatment. When we have permission from the individual concerned, we can raise concerns with the relevant authorities with a view to ending the mistreatment and, when possible, have the incident investigated and the perpetrators brought to justice. In exceptional circumstances, we now consider raising concerns even without an individual's express consent. Even when an individual does not want us to take up their case specifically, our knowledge of it may enable us to lobby far more effectively for improvements in the way in which detainees are treated in general. In many countries we also raise far more general concerns about the treatment of detainees as part of our wider human rights dialogue.

Robert Marshall-Andrews: I understand, as well as anybody, the Minister's reticence to deal with any case that is sub judice, whether before the initial court or before the Court of Appeal. What I do not understand, because he has gone on to deal with the general, rather than the particular, is why we cannot address the very simple issue in this case: that this man, who was plainly under investigation as a terrorist, was allowed to leave this country. I know very well, as does the Minister, that that is precisely the reverse of the normal process that would apply. Anybody who was a suspect in those circumstances would be proscribed from leaving the country, stopped and arrested. Can we not address just this simple question: given the suspicion that this man was under, why was he allowed to travel to Pakistan? That information cannot be sub judice and it cannot interfere with any due process of justice.

Ivan Lewis: My friend is not only honourable but learned, and he knows full well the answer to that question. That is why it is not reasonable or fair, in the context of this debate, to raise any matter relating to a case that is before the courts. He knows full well that any Minister stood at this Dispatch Box could not engage in an answer to that question without jeopardising matters that I understand are still being considered by the Court of Appeal in this country. One must ask why I am being asked to answer a question that hon. Members know I cannot possibly answer from this Dispatch Box at this time. The right hon. Member for Haltemprice and Howden knows better than to fuel conspiracy theories without providing substantive evidence to the House that proves beyond all reasonable doubt that the accusations that he is making about these cases are borne out.

David Davis: I thank the Minister for his earlier comments about my non-partisan approach to dealing with terrorismit is the standard. I cannot give him the evidence behind these cases, for the reasons that I gave earlier; I can simply say to him that I am confident of the facts. He does not wish to comment on the detail, but may I bring him back to a general point? One of the things that the Prime Minister has said is that he will put in the public domain the new guidelines on torture. Will the Minister undertake, tonight, to put in the public domain the current guidelines?

Ivan Lewis: I am not able to do that in this debate. What the Prime Minister committed to do, in terms of this House, was the following. The authentic and genuine concerns raised by the right hon. Gentleman and others have, in a sense, shone a light on an area of public policyGovernment action in the name of the United Kingdomwhere, in a modern world, it is entirely appropriate that there should be proper scrutiny and accountability. In those circumstances, the Prime Minister has gone a step further than any previous Prime Minister; he has said that there is a need for such guidance to be produced and that it should then be made available, so that the standards of behaviour expected of anybody acting in the name of the British Government, or indeed the British people, in fulfilling incredibly difficult security duties are clearly in the public domain.
	There was a timewho knows whether this is the case nowwhen it was perfectly feasible that the right hon. Gentleman could have become, at some point in the distant future, the Home Secretary of this country. If he had fulfilled those responsibilities, he would have faced every day some incredibly difficult judgment calls on how to protect the national security of our countryand balance it with individual human rights and civil liberties. Every day of every week, the Home Secretary, the Foreign Secretary and the Prime Minister have to deal with those difficult dilemmas.
	If the right hon. Gentleman accepts in good faith that this country, and anyone acting in the name of this country, has nowas far as we are awareengaged directly in torture, a secondary question arises. If, as Home Secretary, he received information that came as a consequence of collaboration and co-operation between the United Kingdom and others who may not play by our rules, abide by our standards or respect human rights in the same way as we do, what would he do about accusations against such individualsI wish to make it clear that I am not referring to any individual mentioned in this debatewho were clearly engaged in terrorist activities that represented a threat to the people of this country? What would he have said if he were sat in the Home Secretary's chair? Would he have said, It is not appropriate under any circumstances for me to accept that information or evidence and to act on it, because I believe that there is a real danger that the dreadful security services in country x may have engaged in activities that are totally unacceptable under the standards of the UK?
	I do not know the right hon. Gentleman, but having listened to his appearance on Desert Island Discs I regard him as an authentic, genuine and straight Member of this House. I put it to him that had he become Home Secretary, those are the kinds of judgments that he would have had to make on a daily basis. That is why he more than anyone should not repeat accusations with no substantive evidence to support them. We have a series of allegations, some of which have been made by people who have been convicted, and others made by people who, as far as I know, have not been convicted in any court. We have no substantive, clear, unequivocal evidence to support the right hon. Gentleman's contention that the British Government or agents acting on their behalf have colluded with acts of torture.
	The right hon. Gentleman must demonstrate how he can be so sure that the evidence is so overwhelming and so beyond all reasonable doubt that heas a highly respected and responsible parliamentariancan come repeatedly to this House and use privilege to repeat those accusations.

David Davis: I do not wish to interrupt the Minister's peroration, but I put the question in three parts, one of which was whether he would undertake to look in the places that I indicatedin the agencies and the in- camera proceedings that are all available to himand confirm things for himself. What he says are unfounded allegations, I believe to be facts.

Ivan Lewis: As the right hon. Gentleman knows, I am bound by matters to do with sub judice and the legal framework. Within those constraints, of course I will take responsibility for asking the fundamental questions that need to be asked before a judgment can be made. Of course it is the responsibility of a Minister to ask reasonable, responsible questions to get to the facts
	 House adjourned without Question put (Standing Order No. 9(7)).